Forfeitures

[ac]

Have a Profit Sharing Plan with three participants, Husband, Wife and Employee. Employee terminated and received a distribution. As a result of the distribution, there is a forfeiture of $5,000. Plan calls for forfeiture to reduce employer contribution.

Plan Sponsor had bad year and received no compensation. What can we do with the forfeiture?

[mphs77]

How many employees are there? Perhaps the one termination should be a partial plan termination and thus no forfeitures might occur?

[Lou S.]

Assuming it is not a partial termination (I am making no judgement on this issue) forfeitures can be used to pay reasonable administrative expenses if the plan so allows.

[Belgarath]

Did either of the spouses receive any compensation, or just one of them went with zero?

Personally, I wouldn't lose any sleep over it, and I'd just use it next year. It's pretty hard to reduce an employer contribution when there is zero compensation...