Previously, forfeiture monies could not be used to fund QNEC, QMAC and safe harbor contributions. Proposed regulations change this so forfeiture monies may be used to fund these types of employer contributions.
This change was adopted by ARS effective April 3, 2017. Later in the year, we will be sending clients an amendment to include with their plan document files. A signature is not needed on the amendment.
Because contributions are considered made relative to the year they apply to, forfeitures may not be used to fund QNEC, QMAC and safe harbor contributions for the 2016 plan year. They may be used to fund these types of contributions for the 2017 plan year, after the April 3, 2017 effective date.
Previously, regulations reflected that QNEC, QMAC and safe harbor contributions must be made with monies that were non-forfeitable when first contributed to the plan. Forfeiture monies are most commonly from non-vested profit sharing or match contributions , thus forfeiture monies were not able to fund QNEC, QMAC and safe harbor contributions. The proposed regulations reflect instead that QNEC, QMAC and safe harbor contributions must be made with monies that are non-forfeituable when contributed to participants' accounts. This enables QNEC, QMAC and safe harbor contributions to be funded with forfeiture monies because forfeiture monies become non-forfeitable when they are made to participants' accounts as QNEC, QMAC or safe harbor contributions.