May 06, 2009

Procedures for Accessing Funds from Forfeiture Accounts

TIAA-CREF maintains “forfeiture accounts” for plans that experience forfeitures of plan assets arising from severance of employment, death, or for any other reason.

The Internal Revenue Code (“IRC”) and the Employee Retirement Income Security Act (“ERISA”) regulations governing plan forfeitures require that plan assets, including forfeited amounts, be used for the exclusive benefit of participants or beneficiaries by defraying reasonable expenses of administering the plan or by offsetting future employer contributions to the plan. ERISA further requires that plan assets be held in trust, and that they shall never inure to the benefit of any employer. Finally, plans must be administered according to the terms of the plan document.

As a consequence of recent procedural clarifications that have been made with regard to forfeiture remittance, effective as of January 1, 2009, TIAA-CREF will no longer refund forfeiture account proceeds directly to an institution. Rather, plan administrators can request payments from forfeiture accounts by using one of the following methods.

• Forfeiture funds sent to an alternate carrier or third party: Payments from the forfeiture account to an alternate carrier or third-party service provider for the purpose of funding future remittances or for qualified plan expenses require the submission of a Request for Payment of Plan Expenses from Forfeiture Funds (PDF) form to TIAA-CREF in accordance with the instructions on the form.
  
  
• Funding of future remittances from forfeiture accounts:
  
  
  • The plan administrator must contact TIAA-CREF, with a request to use forfeiture proceeds toward the remittance list, accompanied by the applicable remittance instructions, at least five (5) business days prior to the date of payment. Contact may be with either the Administrator Telephone Center, at 1 888 842-7782 or your TIAA-CREF institutional liaison.
    
    
  • For institutions using OCL EFT: Prior to any submission, the institutional administrator must call the Administrator Telephone Center at 1 888 842-7782 to inform TIAA-CREF that they wish to use funds in their forfeiture account to fund their remittance. TIAA-CREF will then deactivate the automatic EFT from the institution’s OCL account. The institution must then submit the remittance list via OCL, whereupon TIAA-CREF will then reactivate the automatic EFT option on the institution’s OCL account.

The foregoing does not apply with respect to governmental IRC section 403(b) plans where TIAA-CREF has agreed to pay amounts in the forfeiture account directly to the institution. Such payments can, at the institution's request, continue to be made. It also does not apply to any governmental plan where we have agreed to remit forfeiture amounts to the institution pursuant to their legal counsel's opinion that doing so doesn't violate the plan, federal tax law, or applicable state law.

For more information on these revised procedures, call the TIAA-CREF Administrator Telephone Center at 1 888 842-7782, or contact your Managing Consultant.