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Employer Contributions Forfeiture Credit

Employer Contributions Forfeiture Credit

The Employer Contributions Forfeiture Credit allows eligible reporting units to use forfeited employer contributions as a credit for future employer contribution payments. In February each year, reporting units will see the Employer Contributions Forfeiture Credit appear on their employer statement, and can begin immediately to apply the credit towards future defined contribution (DC) and Personal Healthcare Fund (PHF) employer contributions. 

Resources: 

  • Forfeiture Credit Calculation Tool – The Forfeiture Credit Calculation tool allows you to keep track of the credit balance. Click on the link and the tool will be downloaded to your computer. Save the tool to your computer to keep track of your credit balance.

Frequently Asked Questions

 

What is the Employer Contributions Forfeiture Credit?

Each year, ORS will credit each reporting unit with employer contributions paid for former employees who did not fully vest. The credit must be used to pay future employer contributions for defined contribution (DC) and Personal Healthcare Fund (PHF).

Is the credit based on all employer contributions?

No, the Employer Contributions Forfeiture Credit consists of DC and PHF employer contributions only. This includes employer contributions for members in the DC, DC Converted, Pension Plus, and Pension Plus 2 plans, and those who have a Personal Healthcare Fund (PHF).

Are all reporting units eligible for the credit?

Reporting units are eligible if they reported 401(k) contributions during the last school fiscal year.

If my reporting unit is not eligible this year, will it be able to receive the credit next year?

ORS will evaluate each reporting unit's eligibility for the credit each year.

Is this a one-time credit?

No, the Employer Contributions Forfeiture Credit will be distributed each year.

How do I know if my reporting unit is eligible for the credit?

In early February ORS sends an email informing each reporting unit of its eligibility and if eligible, the credit amount.

Are former employee contributions part of this credit?

The former employee's contributions are not part of this credit. Former employees are immediately entitled to their own contributions and earnings on those contributions. Therefore, the money will remain in their accounts. The credits are for employer contributions only and can only be used to cover future DC and PHF employer contributions.

Why are employer contributions forfeited?

If employees leave public school employment before becoming fully vested, they forfeit all or part of their employer contributions. ORS returns the forfeited employer contributions to the reporting unit as a credit each year in February. Employer contributions are vested according to the employee’s years of service. The vesting schedule is as follows:

Years of Service

Percent Vested

After 1 year

0%

After 2 years

50%

After 3 years

75%

After 4 years

100%

A year of service is defined as 1,020 hours in a school fiscal year.

What is vesting?

Vesting means ownership. This means that employees will vest, or own, a certain percentage of the employer contributions based on their years of service. Employer contributions are vested according to the employee’s years of service. The vesting schedule is as follows:

Years of Service

Percent Vested

After 1 year

0%

After 2 years

50%

After 3 years

75%

After 4 years

100%

A year of service is defined as 1,020 hours in a school fiscal year.

How do I record the credit for financial accounting purposes?

MPSERS forfeiture credits are to be recorded as Restricted State Revenue (Major Class Code 312, Suffix 0000), as they are used by school districts to offset the employer portion of current DC plan contribution payments. The recording of current year payroll and benefit expenditures is unaffected by these credits.

How does the reporting unit apply the credit?

The credit is to be applied toward future DC and PHF employer contributions due. Use the job aid called How to apply Employer Contributions Forfeiture Credit to your pay cycle payment and Forfeiture Credit Calculation Tool for assistance in calculating your pay cycle payments.

Can the credit be applied to the entire MPSERS pay cycle payment?

No, the credit may be applied toward future DC and PHF employer contributions only, according to IRS rules.

How do I calculate the amount needed to remit to ORS?

Use the job aid called How to apply Employer Contributions Forfeiture Credit to your pay cycle payment and Forfeiture Credit Calculation Tool for assistance in calculating your pay cycle payments.

What if the former employee was paid by a federal grant?

The credit can be applied towards all DC and PHF employer contributions, which include employees paid by federal grant.

Does the credit have to be applied immediately?

Yes, the credit is intended to be applied to the eligible employer contributions as soon as it appears on the pay cycle statement.

What if the credit isn't exhausted immediately?

There are no restrictions on the time it takes to exhaust the credit. It can take as many as one or multiple pay cycles to use the forfeiture credit.

How many pay cycles will it take for me to exhaust the credit?

Depending on the amount of the credit compared to the total employer contributions in each pay cycle, it may be exhausted immediately or can take multiple pay cycles.

How will I know the credit is exhausted?

You can keep track of the credit balance using the Forfeiture Credit Calculation Tool.