Plan Forfeitures and Safe Harbor Contributions

Your retirement plan was recently restated for the Pension Protection Act (PPA). Within the PPA restatement, IRS mandated that forfeitures could no longer be used to reduce safe harbor contributions (i.e. basic safe harbor match, enhanced match or 3% nonelective).

On January 18, 2017, IRS proposed regulations to remove this restriction. Therefore, allowing plan forfeitures to be used to offset safe harbor contributions. This is great news for 401(k) plans.

IRS has stated that this proposed regulation may be relied upon immediately; however, your plan will need to be amended to remove the language that restricts the use of forfeitures to fund safe harbor contributions. Please note that if you would like to take advantage of this regulation, the plan amendment must be adopted by the last day of the plan year in which the amendment is effective.

Please do not hesitate to contact us with any questions. We encourage you to take advantage of this regulation change. If you have someone in your personal network that would like to discuss this, please let us know.

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