Second, the employer may want to identify and exclude a class of employees that is unlikely to make salary-deferral contributions. Since this employer has a high turnover rate, a vesting schedule, such as 5-year cliff vesting, could encourage employees to stay at least that long to be eligible for that benefit. Second, even if the vesting schedule does not change employee behavior, it will save the employer some money. Forfeited matching contributions are typically used toward meeting the employer's matching contribution requirement for the remaining employees. It is not uncommon for a plan to offer only a lump-sum payment option.
Some employers also offer installment payments.
A new plan will typically not offer annuities, since this will mean that the plan will have to allow for qualified joint and survivor benefits. Because terminated employees have immediate access to benefits, the concepts of normal retirement, early retirement, or death benefits become somewhat less important. Here, the primary reason to include such benefits is to fully vest those who otherwise have not satisfied the vesting schedule. The sponsor may also want to fully vest participants who die or become disabled before completing the 5 years of service. The doctors have decided to establish a profit-sharing plan.