It is time for celebration, especially if you are Nerdy Chad…he prefers to be called Mr. 401k…but more on that later. What is the cause for celebration? Those cool dudes at the IRS recently issued proposed regulations that allow forfeitures to be used to fund Safe Harbor Contributions, Qualified Non-elective Contributions (QNECs), and Qualified Matching Contributions (QMACs).
This was prohibited historically and the above categories required contributions be “non-forfeitable” at the time they are contributed to the retirement plan. This was a constant source of frustrations for Industry Experts and Plan Sponsors. It made about as much sense as a tuna and peanut butter sandwich….YUCK!
The proposed regulations will become effective for years on or after the date the final regs are published. But wait! There is more good news, the IRS has stated that we can rely on these proposed regulations immediately. So, POP THE CHAMPAGNE! My tone sounds facetious, but this actually is really great news.
If you think I am excited you should check out this 19-second video where Mr. 401k (a spinoff character from The Retireholiks Show) shares his enthusiasm for these proposed regulations with a nerdy scream of “Are You Kidding Me!”
The 401(k)nerd has help inventing a new cocktail, and he’s not so happy.
It is important to note that your plan document should be amended to get rid of language that refers to old rules around not using forfeitures to fund safe harbor, etc.
Prefer to read about this from someone more reputable that actually shaves and wears a suit? Check out Napa Net’s piece