As mentioned above, these contributions strengthen a plan and its total benefit to a company. A plan's design specifies how forfeitures are handled. Some plans have it both ways by reallocating money that came from non-elective contributions and forfeiting matching funds to reduce future plan costs. This is commonly known as a profit-sharing plan. Properly administered, this method provides incentives and rewards, builds company loyalty, and allows growing companies to increase or decrease contributions based on their ability to pay.
Individual accounts are also immune from the creditors of individual employees.
Similar protection may not extend to IRAs. This option, known as service requirements, is selected during the plan design. Back to top This page is designed to provide accurate information in regard to the subject matter covered. It is furnished with the understanding that the publisher is not engaged in rendering legal or accounting advice. If legal advice or expert services are required, contact your attorney or accounting professional.