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this could depend on document language. the document might say "Forfeit the unvested portion" but the regs do permit 2 possibilities. I doubt many are aware of this, tripped across it years ago. ok, maybe I should say I might be one of a limited number that even knows this is in the regs. (But then I might miss the obvious but know the obscure) 1.401(m)-2(b)(5) example 7 1. the normal way (for lack of better term) distribute vested portion and then forfeit unvested portion 2. distribute 100%, but now you need to keep the nonvested portion in the plan and it has to vest as rapidly as it would normally. I think if the document had the normal vesting language you are cover whatever that silly language is p*(AB+(R*D))-(R*D) let's suppose the distribution was $1000 and the HCE was 80% vested. you could distribute 800 and forfeit 200 or distribute 1000, but now, at the moment he sort of has been paid out an extra $200. if his remaining match balance was 2000 then at 80% he would be entitled to 1600 less the 200 'extra' he just received. so he receives an odd participant statement. balance = 2000. 80% vested, but vested balance = 1400. but next year he earns a year of service, and is now 100% vested so the problem goes away. well, that is the best I can explain it. If Ricky Ricardo was around maybe he could 'splain it better.