Letter writer Deborah Bonczkowski (Voice of the people, Feb. 18) wondered what happened to the non-vested (i.e. forfeited) portion of her 401(k) plan, since she received only a 60 percent vested benefit. She assumed that her former employer kept the money.
Under IRS regulations, forfeitures from these plans, and all “profit sharing”-type plans, are reallocated to the remaining employees each year; they never revert to the employer. During her several years in this plan, Bonczkowski should have received an annual statement of her account, showing both employer and employee contributions for the year, plus earnings on the account and forfeitures reallocated to her.
Under defined benefit pension plans, forfeitures from terminations do remain in the fund and are used to offset employer costs, as required by regulations.
