Forfeiture Accounts

The forfeiture account balance may be used for one of the following purposes:

• Pay allowable future plan expenses
• Be used to offset future employer contributions
• Allocate to eligible participants as an additional employer contribution
• Restore a previously forfeited account balance

Your plan document may limit these choices, but most plans allow all or some combination of these options. You can manage the usage of your forfeiture balance following the steps outlined in this article.

Timing is important. Most plans require forfeitures to be used no later than the last day of the year after the forfeiture occurs. According to the legal plan document, failure to utilize the forfeiture account is an operational failure. It’s also the kind of oversight that is getting increasing attention from the Internal Revenue Service because an unused forfeiture precludes participants from being provided with additional benefits or reduced plan expenses. A forfeiture can usually be self-corrected if completed within two years of when the forfeiture account should have been used.

Suspense Accounts

You can view the current balance and transaction history of your Forfeiture and Suspense Accounts by navigating to your employer portal, clicking on the "My Plan" tab and selecting the "Forfeiture and Suspense" tab. In the “Forfeiture & Suspense” tab of your employer portal, you will see:

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

Forfeiture & Suspense Balance

At the very top of the “Forfeiture & Suspense” page, you will see your company’s total balance of forfeiture and suspense funds.

Forfeiture Usage Settings

At the top of the page, next to your balance, you will see “Forfeiture 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. 

A blue toggle with the check mark indicates that this feature has been turned on.

A grey toggle with the minus mark indicates that this feature has been turned off.

When you successfully make a change to either of these settings, you will see a green pop-up that says, “Successfully updated Forfeiture 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 & Suspense Transactions

Under your balance and settings, you will see your forfeiture & suspense account transactions. To download a comprehensive list of transactions, select the blue Download button.

Money In:

• Unvested funds from terminated participants

Money Out:

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

Money In:

• Overfunded employer contributions that have been corrected

Money Out:

• Employer contributions offset by forfeitures

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.

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?

Suspense funds will automatically be used to offset future employer contributions. Forfeiture funds can only be used to offset employer contributions, such as the employer match, non-elective, profit sharing, etc. Forfeiture and suspense funds cannot be used to fund 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:

• 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.

Note: Starter 401(k)s are a specific type of 401(k) that Congress introduced in the SECURE Act 2.0 of 2022. Though similar to traditional 401(k)s, Starter 401(k)s do not permit employer contributions. Therefore, if you have a Starter 401(k), you will not be able to use forfeitures to offset employer contributions.