Question: 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?
Answer: 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
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.