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| Doryanne Hamel, CPA, Manager |
Contact information: doryanneh@pgco.com
401-831-0200
Many defined contribution plans include a period of service requirement prior to a participant becoming fully vested in the employer contributions. Therefore, when an employee is terminated prior to meeting the full vesting requirement their non-vested account will be forfeited. Often, these forfeited account balances are transferred to a plan suspense account.
IRS Revenue ruling 80-155 states that a defined contribution plan will not be qualified unless all funds are allocated to participant accounts in accordance with a formula defined in the plan’s document. Therefore, plan administrators who allow the plan’s suspense account to accumulate forfeitures for a number of years may be risking the plan’s qualified tax-exempt status.







