Use of Forfeiture Assets to fund missed Discretionary Contribution

I am trying to get a definite answer on this question, any prior discussion seems to skate around the issue. Can a Plan Administrator use forfeiture assets to fund the lost opportunity cost portion of a missed discretionary contribution (i.e - Profit Sharing)?

I am certain that forfeiture assets cannot be used to fund the lost opportunity cost portion of "required contributions" (either employee or employer) because this is in direct violation of a fiduciary's "Prudence Standard" as well as a Prohibited Transaction, accordingly, when these types of contributions are delinquent the plan has a claim against the employer. However, Field Assistance Bulletin (FAB) 2008-01, specifically states that "employer contributions become an asset of the plan only when the contribution has been made". Under this definition because the contribution is not late it cannot be a PT; but does the fiduciary still have a duty to collect creating a claim against the employer for the lost opportunity portion.

I am inclined to say that forfeitures cannot be used to fund the lost opportunity cost portion of a missed discretionary contribution. I don't see any language that qualifies the lost opportunity cost as an expense eligible to be pulled from the forfeiture account, and transferring the lost opportunity cost from the forfeiture to the participant does not make the plan whole.

You mean you have a combination of a plan document and/or employer resolution pursuant to which a discretionary contribution was committed to as of a particular date (so that employer lost discretion as to both amount and timing), but the actual contribution was delayed and the employer believes it has to provide earnings attributable to the delay? I think that for the reason you mention (not plan assets until contributed)you probably don't have a fiduciary duty issue. But if not making the (formerly discretionary) contribution on time was a "failure to follow plan documents" under ERISA and Code, then using forfeitures to pay the earnings make-up would likely be a "use of plan assets in own interest or for own account" PT under ERISA and Code, since the forfeitures are plan assets.

The Plan Document does not commit to a date, the Adoption Agreement simply elects the "Discretionary Contribution" option. However, we do have a handbook distributed to the employees eluding that the discretionary contribution will be deposited within a certain window.

From what I understand, this "lost opportunity cost" is an arbitrary figure, not based on plan documents or compliance-related dates.  (Not that you are making up a number, but the date everything is based on is essentially arbitrary, at least as far as the plan is concerned.)  That makes it a contribution.  And if you have forfeitures, you can use them to reduce contributions. 

It's my understanding that discretionary employer contributions must be remitted no later than 30 days after the plan sponsor's tax return filing deadline. So, if we are past that date, it is too late to make the contribution.

If it is a required employer contribution, then that is a different matter.

I am in general agreement with the above. If the plan sponsor in facts decides to make a discretionary contribution on a date X pursuant to a resolution, and that date passes, using plan assets for the earnings portion of the late contribution would be a prohibited transaction.