Cash Out, Forfeiture, Repayment & Roth!

[BTH]

A participant terminates employment and is automatically cashed out into an IRA by the recordkeeper.    The individual was less than 100% vested, so forfeited his unvested funds.    The individual is then re-employed and wants to repay the rollover in order to have his forfeited funds reinstated.    He rolls over most (but not all) of the distributed balance back into the Plan, but there is a catch.  Some of funds which were automatically distributed from the plan were Roth, but the plan does not accept rollovers from Roth IRAs.    So while the participant did not fully repay the distribution, he did repay all that was technically allowed to be repaid back into the plan.   

I'm leaning towards the position of reinstating the participant's forfeited amount since they did transfer back all that was allowed by the plan.   Any other thoughts?

Thanks.

 

[Paul I]

The Roth account by definition was 100% vested when the participant terminated.  Any forfeiture would have come from an employer source (match and/or nonelective employer contribution).  If the amount distributed from the partially employer sources are repaid, then the associated forfeitures should be reinstated.

[casey72]

Some plans are drafted to require the entire distribution to be repaid in order for forfeitures to be restored.

Just because the plan won't accept a rollover of the Roth IRA doesn't mean the participant can't repay it. Participant could repay with funds outside of IRA.