Asset Reversion

[Guest SGNeedelman]

A 457(b) plan provides that the employer will make an employer contribution to the plan in addition to the employee's elective deferrals. The employer's contributions will be subject to a three year cliff vesting schedule. If the employee terminates prior to becoming fully vesting, the nonvested monies will be returned to the employer.

ERISA Section 403©(1) requires that once an amount is contributed to a plan, it is a plan asset and cannot be returned to the employer. Are government plans subject to this restriction?

[TLGeer]

In effect, the forfeitures are applied to reduce future contributions. In the alternative, they could be applied to pay expenses. But they cannot revert while the plan continues.

Tom Geer