plan termination and small accounts with non-vested amounts

I have a plan that is freezing on 3/4/23 with 100% vesting of all account balances as of that date, and then terminating on 3/31/23. There are small accounts $5000 and under for terminated participants that have not been cashed out yet and the recordkeeper informs us that there is no time to do the normal cash-out process where a distribution package is mailed to the terminated participants (with normally a 30 day period to respond or the account will be automatically rolled over to the IRA) and therefore the non-vested amounts cannot be forfeited. My question is - can we forfeit the non-vested amounts prior to the 3/4 freeze date without a corresponding cash-out process? They will get the termination package after the 3/31 termination date. Issues/comments? Thank you!

Uh, no.  They get the benefit of being fully vested on termination.  In our experience, the IRS takes a dim view of attempting to forfeit pending a termination, and I've actually seen them make you go back and restore account balances previously forfeited.

How much is involved?  The employer can't get he money, nor in my opinion use it for plan termination expenses (that's a settlor function/expense).  It'd have to be reallocated to others, but is it that much to be concerned about?

I guess since the plan document has the involuntary cash-out provision, how do you operate in compliance with the document? You are saying it is too late to comply with the plan and cash-out these small amounts?

Is this a Qualified Defined Benefit plan covered by PBGC? If so, all of the participants are 100% vested at termination and it is too late to forfeit any benefits. When was the Form 500 received by PBGC? The plan cannot make any payments due to termination until 60 days after that date. Read the letter than plan received from PBGC regarding the termination for timing. As part of the termination process, the plan must mail out Notices of Plan Benefits, etc. even for those with balances under $5,000. If there are participants that do not respond to the NOPB and don't make elections you cannot do automatic rollovers, even if you have the provision in the Plan Document. Look at the PBGC rules regarding plans with a plan termination date on or after 1/1/2018. The payments must be made to the participants (i.e. lump sums) or the plan purchases an annuity from an insurance company. The plan must complete due diligence to find the participants and if the plan cannot find the participants the only options are purchase an annuity (which may not be practical for balances under $5,000) or pay the money to the PBGC using the PBGC Missing Participant Program.