Forfeiture Reallocation

[Chippy]

I have a 401 (k) profit sharing plan, where the forfeitures are reallocated.

For 2013, the forfeitures did not get transferred out of the forfeiture account and into the participants accounts.

The transfer is going to be made now. It's not a lot of money, the top earning participants got about $650.

For 2014, do those amounts have to be included in the 415 test?

[QDROphile]

Forfeiture allocations are annual additions. They are included in the test for the year of allocation. Your message is not clear about the year of alloccation

[Chippy]

the year of allocation was 2013, but they were not transferred to the participants accounts.

[QDROphile]

I think you are asking if the delay in formally creditiing forfeiture amounts to the particpant accounts calls into question the proposition that the allocation was made in 2013. I think you have to take into account the totality of circumstances to determine if the allocation is in 2013, 2014, or 2015. The bookkeeping transfer is one bit of evidence, and it is negative for 2013. If there is no, or not enough, evidence of timely actions consistent with a 2013 allocation (as compared with a 2015 allocation, supported by the bookkeeping transfer), then the allocation would not be consdered to have occurred for 2013. Another proposition to consider is that the plan has an operational failure because it did not act to effect the forfeiture allocation that the plan evidently called for in 2013. Correction of the faliure might not be so scary.

[Bird]

In my world, there would be a comprehensive account balance statement for 2013 showing all allocations of anything and everything, including (these) forfeitures. We might have to create a separate account called "pending forfeitures" or something like that but if it was allocated in 2013, that's when it would show up on the comprehensive statement; it would be an annual addition for 2013, and this question would not arise.

The physical movement of money is a separate and somewhat irrelevant operation. I'm not sure if it's a "problem" to move it more than a year later but I would probably just do it and move on.

[TPApril]

along similar lines, but a different situation than the beginning of this thread.

2013 Plan Year had $1000 in forfeitures to be allocated first to fees, then to participants.

Fees for 2013 totaled $700. There is $300 in outstanding forfeitures that was never allocated.

Meanwhile 2014 fees are another $700.

Question 1: Can that $300 now be applied to later fees, or should they still be allocated to participants?

Question 2: Amounts in example are pretty real. Due to small amount, would that make it okay to apply that forfeiture to current fees, if answer to Question 1 was No? Doing so would be a much less timely process.

[Bird]

Question 1: Can that $300 now be applied to later fees, or should they still be allocated to participants?

According to what you wrote, they should have been allocated in 2013. Are you going to allocate on 2013 comp? That what should happen...(but see below).

Question 2: Amounts in example are pretty real. Due to small amount, would that make it okay to apply that forfeiture to current fees, if answer to Question 1 was No? Doing so would be a much less timely process.

The amount involved doesn't make it "ok" but that's what I would do. (See comment in other thread about being practical .) Actually you might want to review your document on when forfeitures must be used - our document (Ft Wm) says they must be used by the end of the year following the forfeiture, and I'd have no problem accruing it for 2014 if you are still working on a 2014 val and actually paying it in 2015.

Disposition of Forfeitures. Amounts forfeited from a Participant's Account shall be used to restore forfeitures or reduce Company contributions (or reallocate as Company contributions) made pursuant to Article 4, or to pay reasonable Plan expenses to the extent specified in the Adoption Agreement. Effective for Plan Years beginning after the adoption of the 2010 Cumulative List (IRS Notice 2010-90) restatement, forfeitures cannot be used as Qualified Non-Elective Contributions, Qualified Matching Contributions, Elective Deferrals, or ADP test safe harbor contributions (Code section 401(k)(12)). Any such disposition of forfeitures from a Participant's Account shall be made no later than the end of the Plan Year following the Plan Year during which the forfeiture occurred.