Q: During the first quarter of this year we have had a number of employees leave our organization, some of which had nonvested employer contributions. Do you have any guidance on how best to handle these?

Financial advisor 401k

A: The money must be moved into the plan’s forfeiture or suspense account, where it can be used to:

  • Cover other employer contributions already payable by the plan
  • Restore the accounts of rehired employees, subject to certain criteria 
  • Pay ERISA-approved plan expenses
  • Make additional employer contributions for existing plan participants 

Regardless of which option a plan sponsor uses, ERISA specifies that any forfeited contributions be used for an appropriate purpose by the end of the plan year.

Ready to discuss your retirement plan with a 401(k) Advisor?

RP-774-0322 Tracking #1-05256811

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.