3758 / What rules regarding nonforfeitability of benefits apply to 401(k) plans?
An employee must be fully vested at all times in his or her elective contributions and cannot be subject to the forfeitures and suspensions that are permitted by the IRC for benefits derived from employer contributions ( Q 3869). Furthermore, such amounts cannot be taken into consideration in applying the vesting rules to other contributions.1
Employer matching contributions and nonelective employer contributions that are taken into account for purposes of satisfying the special nondiscrimination rules applicable to cash or deferred arrangements ( Q 3802) must be immediately nonforfeitable and subject to the withdrawal restrictions explained in Q 3797.2 All other contributions to a plan that includes a cash or deferred arrangement also are subject to these restrictions unless a separate accounting is maintained.3 Contributions made under a SIMPLE 401(k) plan are subject to special nonforfeitability requirements ( Q 3778).
1. IRC § 401(k)(2)(C); Treas. Reg. § 1.401(k)-1(c); see also Treas. Reg. § 1.401(k)-1(c).