401K vesting?
If one has a 401K where the employer match is vested over X number of years and an employee leaves before being fully vested in said match, does the forfeited employer contribution automatically default back to the employer or is it optional to disburse it to remaining employees in the plan?
Thanks. I’ll hang up and listen.
Permalink Submitted by Alan - IRA critic on Thu, 2017-04-06 18:28
Plans can go either way or this, either crediting forfeitures to the accounts of other plan participants or using the forfeitures to offset plan expenses.
Permalink Submitted by THOMAS WNUK on Thu, 2017-04-06 19:01
Just to clarify then, there are no regulatory requirements obligating the employer to act in a specific manner?
Permalink Submitted by Alan - IRA critic on Thu, 2017-04-06 23:45
There are requirements for use of the forfeitures, but they are limited to either using the funds to reduce plan expenses to the employer, or to subsidize the company matching contributions, etc. Or they can allocate the forfeitures to the account of participants. Therefore, there is flexibility but the plan must account for how the funds are applied. The plan document should specify how forfeitures are treated and they must adhere to that document.
Permalink Submitted by THOMAS WNUK on Fri, 2017-04-07 01:26
Thank You.