We have a company that has been late with many of their ee deferrals. We have determined the amounts they need to pay for gains that would have been accrued had the amounts gone in when they were supposed to. My question is whether or not they can use money from the forfeiture account to pay this expense? Thanks for the thoughts!

The employer should make a contribution to restore the loss to the plan.

Why do you say that? They usually use the forfeiture to pay part of the er match. Thanks!

This is not a contribution. It is restoring income to the plan.

I think that would be a prohibited transaction.

If the obligation to contribute the gains to participants' accounts is imposed upon the employer then it would be a prohibited transaction for plan assets to be used to discharge such an obligation since plan assets can not be used to benefit the employer.

Exactly.