When can a forfeiture be recognized?

[Vlad401k]

Let's say a participant terminates employment on 1/1/2010 and he's 50% vested in the matching portion of the account, can the plan forfeit the non-vested balance right away?

I know that the IRS states that the forfeiture of more than 0% but less than 100% vested account can be recognized at the earlier of 1) 5 years of break in service and 2) participant electing a distribution.

Is it possible for the plan document or the adoption agreement to have language that allows to forfeit the account before such date occurs?

[Jim Chad]

FWIW I don't think so. Anyone else want to weigh in?

[Lou S.]

Jim I agree with you.

[BG5150]

I think it's a plan document issue. I don't think you have to wait 5 yrs (or until the ppt takes a distribution).

[BG5150]

This is a selection from one of our AAs: (note letter "e")

a. As of the last day of the Plan Year in which the Plan Administrator distributes the
Participant's entire vested interest.
b. In the Plan Year in which the Participant's 5th consecutive Break in Service occurs.
c. As of the Valuation Date coincident with or next following the Distribution Determination
Date. (See Section G.4.)
d. As of the earlier of the last day of the Plan Year in which the Plan Administrator distributes
the Participant's entire vested interest, or the last day of the Plan Year of the 5th
consecutive Break in Service.
e. In the Plan Year in which the 1st Break in Service occurs.
f. Forfeitures shall be allocated in the Plan Year following the Plan Year in which they are
determined.