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

Over the last two years, nearly 80 class action lawsuits alleging the misuse of retirement plan forfeitures have been filed against major U.S. retirement plans and their fiduciaries.

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 and fiduciaries 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, risk mitigation strategies, and other key issues.