In employee retirement plans, the nonvested remainders left by terminated employees. In qualified pension plans, forfeitures must be used to reduce employer contributions in subsequent years. In profit-sharing plans, forfeitures may be allocated among remaining participants.
Forfeitures are contributions that remain in a plan after a participant has terminated employment and has received his vested distribution. In a profit sharing plan, these unvested contributions may be allocated to remaining plan participants or be used to reduce future employer contributions.
Sometimes there is money that is left in a retirement plan when an employee terminates employment before becoming fully vested in their account. Any amount that is considered as “forfeiture” could be used by the plan to pay plan expenses; or it could be reallocated among the remaining participants in the retirement plan; or it could be used to reduce the contribution amount the employer pays.
The benefits that a participant loses if he terminates his employment before becoming eligible for full retirement benefits under the plan.
Amounts contributed on behalf of terminated, non-vested participants. In a pension plan, such amounts must be applied to reducing future employer contributions. In a profit-sharing plan, such amounts may be allocated to the accounts of remaining participants.