Avoiding Pitfalls in Retirement Plan Forfeitures

“Plan sponsors possess great flexibility in using forfeitures in the administration of their defined contribution retirement plans. Forfeited funds, instead of employer assets, may be used to pay for employer contributions or plan expenses. Forfeitures generally exist in plans with vesting schedules, and Internal Revenue Code (IRC) rules, plan terms, and in some cases the exercise of fiduciary discretion determine their use. Plan sponsors, however, sometimes encounter challenges in determining when forfeitures occur and how to use them appropriately. Specifically, some sponsors may not have established effective procedures for the timing and use of forfeitures.” Continue reading.

Source: The Vanguard Group, Inc.