Reinstating forfeitures after rehire

[EBDI]

This is a safe harbor 401k plan in which a former employee terminated in 2009 and is re-hired in 2017.  She would like to repay the distribution from the plan in order to have the profit share forfeitures repaid into her account.  The plan document states the following for rehire after 5 One Year Breaks:

After Five One-Year Breaks.  If a Participant resumes employment as an Eligible Employee after forfeiting the nonvested portion of his Account balance after 5 consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method) and is not fully (100%) vested upon reemployment, the Participant's Account balance attributable to his pre-break service shall be kept separate from that portion of his Account balance attributable to his post-break service until such time as his post-break Account balance becomes fully (100%) vested. A Participant with a balance in his Elective Deferral Account shall be considered a vested Participant for purposes of Code section 411(a)(6)(D)(iii).

 

Why would the non-vested forfeitures have to be kept separate?  Does vesting in the returned forfeitures increase with each subsequent YOS? She was 60% vested in 2009.

[Bird]

Typical language would, I think, require the repayment before the 5 year break in order to reinstate forfeitures.  The language cited above is what happens if the participant forfeits but isn't paid.

I could be wrong; never had to deal with it.  But that's how I see it. 

[Kevin C]

I read it as saying the vested balance from prior to the break is kept separate from the new after-rehire balances until the participant becomes 100% vested.  It addresses rehire after the non-vested portion has been forfeited, so any remaining balance at rehire would be vested.  If they are not fully vested, new money would be subject to the vesting schedule, but the old vested balance would remain vested.

 

I don't see anything there that would let someone with >5 yrs BIS repay a distribution and get forfeitures restored. 

[ESOP Guy]

Yes double check you are reading the document correctly.  I have never seen a document that allows for a repayment and restoration of forfeitures after 5 1-year Break in Services.

 

[BG5150]

An example from the clip in the OP:

Participant has $10,000 in Match, is 60% vested and terminates in 2010, leaves money in plan. (assume no earnings)

At the end of 2015, $4,000 is forfeited per the 5 BIS rule.  Account balance is $6,000.

Person is rehired in late 2016.

The $6,000 must be kept separate, as it's fully vested at the moment.  Any new match is still subject to the vesting schedule, starting at 60% in 2016.  After 2018, the accounts can be recombined (assuming participant accrued a YOS for vesting each year).

This has nothing to do with buyback of forfeitures, as others have said.

[EBDI]

Thank you for the responses!