Are new forfeitures reported as "other income" on Schedule H part II line 2c?

[Micks]

The Form 5500 preparer will not net new forfeitures collected in the year with the distributions, but is showing them as "other income".  Is this correct?

[Lou S.]

What?

New "forfeitures" in a DC plan simply are internal transfers from the participant account to a plan holding account. They are not a distribution, contribution, or income.

If forfeitures are used to reduce employer contributions from  the forfeiture account, you would reduce contribution shown by the forfeitures reallocated.

[BG5150]

Quick example: 

One distribution $10,000 80% vested. Only $20,000 in deferrals contributed.

Open balance: $100,000

Contribs: $20,000

Earnings $1,000

Distribution: ($8,000)

Fees: ($500)

Closing Balance $112,500

Note the distribution is NOT $10,000, but only the vested piece of $8,000.  The $2,000 was already in beginning balance, and is still there (in the forf account instead of participant's account) at the end.

[BG5150]

Is it a preparer of the 5500 or the auditor?

If it's the auditor, run!

[Bird]

24 minutes ago, BG5150 said:

The $2,000 was already in beginning balance, and is still there (in the forf account instead of participant's account) at the end.

Or it's been allocated as, say, a profit sharing "contribution." But it's not a contribution on the income statement, nor should it be netted with distributions; seeing only two incorrect options is what elicited the "What?" reaction from Lou S. (I guess maybe the OP might think of your example as "netting" $10K - $2K to get $8K. But anyone who is thinking of the distribution as $10,000 and requiring some kind of income to offset it is...uneducated, to be as polite as possible.)

[Micks]

 

Thank you for all the input.  Here is additional information. The Plan changed providers in 2022. This is what the new Plan custodian who prepared the 5500 did- the $214K was a receivable on the prior year 5500 that was funded in 2023 and they lumped it in with other income.  The $10K are "new forfeitures" from less than 100% vested distributions while the plan was at the previous custodian also included in other income .  I am reclassing the $214K as a receivable on the financials and total distributions will be shown as gross amount.  I think the only "other income" that should be shown on the 5500 is the $2500.  

The $10,622 should be shown on the net assets available for benefit in whatever fund the forfeiture account is being held in.