Suppose the following:

- an MP plan's document specifies that forfeitures are "used to reduce" future MP contributions.
- the MP plan provides 204(h) (now 4980F) notice to the participants stating that the MP contributions will cease and the plan will merge into an existing PS plan.
- the MP plan has an "employed on the last day" benefit accrual requirement, and provides the employee notice early enough to prevent a MP contribution from accruing for its final year, but late enough that there have already been forfeitures added to the MP plan's forfeiture account during the year.

Given the plan merger and the fact that there is no final MP contribution that the forfeitures can be used to reduce, how are those final MP forfeitures to be handled? Should the merger amendments address this (I assume so) - and if so, what is the common or recommended way to handle these forfeitures? Reallocate to the MP participants eligible to share in the reallocation that plan year?

Thanks.

What is the effective date of the merger?

MPP merged into 401k 12/31/01. As stated in the initial post, notice provided timely, so no MPP contrib for plan year ending 12/31/01. Now it's 2002 and some MPP forfeitures are available. I'll probably allocate the forfeitures to former MPP participants, and put the $$ in their MPP "merged" source in the 401k plan. Comments/recommendations appreciated. Thanks. Maverick

My feeling is that Code Section 414(l) requires all unallocated amounts to be allocated "as of" the merger date, since total account balances must equal total plan assets. I would have addressed this in the merger documentation and made any amendments to the money purchase plan needed to make this special allocation if the normal allocation rules couldn't be followed.