Qualified plan documents can be written to accommodate plan

Qualified plan documents can be written to accommodate plan forfeitures in different ways. Which of the following statements is correct?

A. Stock bonus plans always allocate plan forfeitures to participants’ accounts since it is a stock plan.

B. Safe harbor 401(k) plans never allocate plan forfeitures of matching contributions to participants’ accounts.

C. Defined benefit plans (but not cash balance plans) have two options to deal with forfeitures.

D. Employers can use the forfeited funds to pay other expenses of the business outside the qualified plan.

Solution

Solution: A. Stock bonus plans always allocate plan forfeitures to participants’ accounts since it is a stock plan.

Explanation: A stock bonus plan is a defined-contribution profit sharing plan that always allocate plan forfeitures to participants’ accounts wherein the employers contribute company stock