Forfeiture Reallocation

[Chippy]

I have a profit sharing plan that has old MP money that still follows a vesting schedule.

When reallocating forfeitures of the MP money, must that money stay in that source?

What's happening is that participants are receiving small amount of forfeitures in that source, and then they terminate before becoming 100% vested and then they have a small amount of forfeitures to reallocate and so on. I only have 319 in forfeitures to allocate among $5,000,000 in comp. Someone earning $45,000 is getting less than $3.00.

I'd like to allocate all the forfeitures under the profit sharing source if that's allowed.

any other suggestions on how to handle these forfeitures?

[Kevin C]

What does the plan say? It may not directly address forfeitures from merged MP accounts, but it will say what happens to forfeitures and when.

[Chippy]

The plan doc says......forfeitures attributable to Nonelective Contributions shall be added to any nonelective contributions for the plan year and reallocated among the participants nonelective contribution accounts.

[rcline46]

Jim Holland resolved this back in 2001. Forfeitures do not have a source. whomever has been reallocating to the source (unless the document says to do it) has been incorrect, and messing you up.

[Bird]

Forfeitures do not have a source. whomever has been reallocating to the source (unless the document says to do it) has been incorrect, and messing you up.

I agree, with the caveat that you can't use forfeitures to fund SH contributions, at least when using a PPA document.

Another solution for "getting rid" of these is to pay them to the TPA as fees, if permitted by the plan.

[Chippy]

thank you. Plan does not allow for forfeitures to pay fees, but I may suggest that for the next restatement. That is so much better to allocate to the Profit Sharing source. It will eliminate the small balance in the MP source. Guess I never realized that forfeitures could be reallocated to another source. that's perfect and what I wanted to do.