Forfeitures used to reduce employer contribution.

[Guest Giovanni]

I have a 401(k) plan with a discretionary match and the forfeitures are used to redube employer contribution. The company does not want to make a matching contribution, yet there are forfeitures. Is it ok to hold the forfeitures until some future year when a matching contribution is made?

[wmyer]

Is the plan document silent on timing of forfeitures? The document should usually specify when forfeitures must be reallocated.

[R. Butler]

Couldn't they just do the match in the amount of the forfeiture?

[Guest Jeff V]

I agree with wmyer, the plan document should be specific on the timing of the company contribution AND the forfeitures.

If it's not, I would think the prudent thing to do would be to either make the discretionery match the exact amount of the unallocated forfeitures for this year, or just keep the unallocated fofeitures in an unallocated account. As a PR gesture, if the company did poorly (I'm supposing that's why they don't want to make a contribution, and they're probably trying to eat the forfeitures, too, right? Just say NO) they might at least do the former, unless the resulting match per participant would be something like a penny.

[Richard Anderson]

Timing of forfeitures does not seem to be the problem here. Disposal of the forfeitures is the problem. We do what R. Butler suggests. I'm reluctant to leave forfeitures sitting in the plan until the next matching contribution. What if the employer never makes another match? Should the forfeitures just remain in the plan? Our document is silent about what to do with forfeitures if the employer makes no match, so we suggest to the client that this year's match is exactly the amount of forfetures.

[Guest LAAllen]

Document is silent on the timing of the forfeiture reallocation. It only instructs as to when a forfeiture occurs

Problem is, now the plan is terminating.

Want to be sure that we were not supposed to be allocating these forfeited amounts for the past couple of years....see the ramifications???

Thanks for all the replies...and I guess the answer is that prudently it would be wise to reallocate forfeitures even though there is no contribution, but legally no one sees a problem? We did hold the forfeitures in a seperate forfeiture cash account.

[Guest LAAllen]

oops.....sorry for the above post. I thought this was my question...I posted the exact same question.

Sorry!!!