Treas. Reg. 1.411(a)-7(d)(5) provides two methods for calculating vesting after a distribution in which the employee is less than 100% vested. After refunding money to pass the ACP test, in which money is also forfeited since the employee is less than 100% vested, our recordkeeping system shows the remaining balance for the employee at 59% versus 60% which he was prior to the distribution. Customer argues that the regs don't work for ACP refunds because of the forfeiture issue.

Does anyone have this issue? Our recordkeeping system is a Sungard product. I don't think the system is straying away from the reg as it is written, but applying the logic in the reg to excess aggregate contribution refunds may not be correct either.

Unclear? Try to explain the reg to a customer who understands it less.