Forfeiture balance

[PS]

Hi, 

One of the plan is terminating since the company is closing.  The balance in the forfeiture is $843,650.03 this is a huge balance and as per the plan sponsor they discussed with their counsel and the counsel has advised to return the funds to the company ( employer).  The owner and was never involved with the administration of the plan and the person who was handling it is no longer with the company, the owner is the only one left and wants to close the plan since the company is closing. 

The huge amount is because there were participants who had forfeited the funds since 2014, however no part forfeited the unvested amount during the plan termination since the plan was made 100% vested as of the term date 01/31/2022.  The funds seemed to have just accumulated which is a operation defect. 

• There are no forfeited checks 
• No outstanding checks 
• The forfeiture in the forfeiture in only the employer match

The plan sponsor and they counsel have advised to return the funds to the company, I've never seen just huge amount in a forfeiture and since they are asking to return the funds is it something doable? is there any exceptional clause (IRS) since they have submitted the letter from counsel is there anything that we will need to look into/consider from compliance perspective?

 Thanks

[ESOP Guy]

As far as I know there is no exception or rule that allows for the return of the funds. 

I can tell you also if I were faced with this situation I would be saying and my bosses would be agreeing:  we want something in writing from the counsel before we help do this.  We want written direction from the plan sponsor and trustee also.  

We would want pieces of paper we can pull out to protect our firm if this gets bad.  

[BG5150]

I would tell them to get a second opinion from counsel who specializes in ERISA matters.

This sounds like someone taking complex patent law advice from a divorce attorney.  Just because someone is an lawyer, doesn't mean they know what they are talking about in all fields of the the law.  (Would you ask your gynecologist what to do about Parkinson's Disease?)

[PS]

55 minutes ago, ESOP Guy said:

As far as I know there is no exception or rule that allows for the return of the funds. 

I can tell you also if I were faced with this situation I would be saying and my bosses would be agreeing:  we want something in writing from the counsel before we help do this.  We want written direction from the plan sponsor and trustee also.  

We would want a pieces of paper we can pull out to protect our firm if this gets bad.  

Yes, the they have sent in a written letter and the counsel is also sending a opinion letter stating why they feel it is within the law.  Since we are only the record keeper a letter from counsel and plan sponsor should HOLD good I guess. 

[PS]

52 minutes ago, BG5150 said:

I would tell them to get a second opinion from counsel who specializes in ERISA matters.

This sounds like someone taking complex patent law advice from a divorce attorney.  Just because someone is an lawyer, doesn't mean they know what they are talking about in all fields of the the law.  (Would you ask your gynecologist what to do about Parkinson's Disease?)

Yes, I agree!  I will have the plan sponsor get a second opinion. Thank you.  

[Bri]

I bet the plan's document itself also is going to prohibit this.  I wonder if the attorneys are thinking DB plan reversion....