Forfeitures

Forfeitures are the non-vested portion of an employee’s account that they leave behind when taking a plan distribution, such as after separation of employment. Those leftover account balances are moved to the plan’s forfeiture account. Depending on your plan documents, you may be permitted to use your plan’s forfeiture funds to:

  • Offset employer contributions
  • Offset plan fees

Forfeiture settings can be managed in the employer portal by going to the “My Plan” tab and selecting the Forfeiture button. 

In the “Forfeiture” tab of your employer portal, you will see:

    • Your forfeiture balance
    • Your forfeiture usage settings
    • Your forfeiture transactions

Forfeiture page

Forfeiture Balance

At the very top of the “Forfeiture” page, you will see your company’s total balance of forfeiture funds. As a reminder, the amount listed underneath “Total Balance” is the total amount of forfeiture funds you have available to offset either employer contributions or plan fees. 

Total balance of forfeiture funds

If you have not accrued any forfeiture funds yet, the number under “Total Balance” will be $0.00. This means that no employees have left behind non-vested portions of their accounts upon taking a distribution, such as after separating from employment.

Forfeiture Usage Settings

At the top of the page, next to your balance, you will see “Usage Settings.” This section allows you to select how you want to allocate your forfeiture funds. There are two different options, and either/both can be turned on or off.

  • "Automatically use forfeitures to offset Employer Contributions"
  • "Automatically use forfeitures to offset Plan Fees"

To turn either of these settings “on,” click the toggle switch. 

Screenshot 2024-06-27 at 4.55.02 PM.png A blue toggle with the check mark indicates that this feature has been turned on.

Screenshot 2024-06-27 at 4.54.56 PM.png A grey toggle with the minus mark indicates that this feature has been turned off.

When you successfully made a change to either of these settings, you will see a green pop-up that says, “Successfully updated Forfeiture Settings.” 

Green popup that indicates you have successfully updated your settings. 

Vestwell’s default is to automatically apply forfeiture funds to a plan’s employer contributions and plan fees. When forfeiture funds are depleted, contributions will switch to the ACH bank account on record. If you do not want your forfeiture funds to be automatically applied to employer contributions and plan fees, please toggle off the settings. 

If the plan is not integrated, the employer has the ability to choose how much of their available forfeiture balance to use for each contribution submission.

Forfeiture Transactions

Under your balance and settings, you will see your forfeiture account transactions in “Forfeiture Settings.” To download a comprehensive list of transactions, select the blue Download button.

Transactions to the forfeiture account can include:

Money In:

  • Unvested funds from terminated participants
  • Reallocations due to failed annual nondiscrimination testing

Money Out:

  • Employer contributions offset by forfeitures
  • Fees paid from the forfeiture account

Some transactions may include additional details for clarity, such as the employee associated with the forfeiture, the specific employer contribution offset, or the type of fee covered. Each listed transaction will also provide the following information:

  • Date
  • Description
  • Amount
  • Status

The transaction description may have blue hyperlinks, which, when clicked on, can provide more information about the transaction. For example, in the transaction below, clicking on Rhodes, Paul will take you to Paul’s employee page, where you can review his account, transactions, and more.

Example forfeiture transaction

Certain transactions may also include an information icon. When you click on this icon, more information about the transaction will appear. 

How Does Forfeiture Usage Work With Manually Submitted Contributions?

Forfeiture funds can only be used to offset employer contributions, such as the employer match, non-elective, profit sharing, etc., and not employee contributions.

Once a manual contribution has been started and the employees’ contributions have been entered, employers will see the forfeiture amount that can be applied to the employer contribution amount:

Ferfeiture_Contributions.gif

  • Regardless of whether the setting is on or not, employers will be asked how much (if any) of their balance they want to use for each contribution they submit. 
  • If the setting is on, the "amount to use" will default to the maximum available amount, but can be changed to any value. 
  • If the setting is off, the "amount to use" will default to $0, but can be changed to any value up to the max available.

After setting the desired forfeiture amount to use, contributions can be submitted.

If you have any questions, please reach out to clientsuccess@vestwell.com