Forfeitures in Qualified Retirement Plans: Recent Lawsuits, Challenges, Mitigating Compliance Risks

BARBRI

Employer-sponsored retirement plans continue to experience heightened compliance risks stemming from plan forfeitures resulting in a series of lawsuits against fiduciaries. Plan sponsors and their counsel seeking to use forfeitures must determine when forfeitures occur and how to use them appropriately in light of recent lawsuits, in addition to other key considerations.

Forfeitures are plan assets derived from non-vested employer contributions that are forfeited from a participant's account when that participant terminates employment and is not fully vested. The plan document typically specifies the timing of the forfeiture, vesting schedules, applicable IRS rules, and in some cases is left at the discretion of the fiduciary. Instead of using employer assets, these forfeited funds can be used to pay for employer contributions or plan expenses. However, plan sponsors face a number of challenges stemming from IRS rules, plan documentation, timing, and other key items that must be considered to mitigate compliance risks.

Listen as our panel discusses recent developments and ERISA forfeiture lawsuits, the timing of use issues, permitted uses, reducing employer contributions and paying plan expenses, risks, and other key issues.

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