Reconcile retirement-plan forfeitures before they are used

Before using a defined contribution plan's forfeiture balance, connect each addition to the plan provision and participant event that created it. Obtain the administrator's vesting and forfeiture determination, together with the recordkeeper transaction. A former employee's unvested balance is not a general cash reserve available for finance to spend.

Read the signed plan document and amendments covering the period. Ask the administrator to identify when a forfeiture occurs and what restoration provisions may apply. Keep a pending determination separate from a confirmed forfeiture so the reconciliation does not authorize use of an amount still under review.

Prepare a rollforward showing beginning balance, new forfeitures, investment activity, approved uses and ending balance. Retain the plan year associated with each amount. A single balance on the latest recordkeeper statement conceals older amounts that may need a different timing review.

For an illustrative account beginning with $8,000, additions of $3,000 and approved uses of $6,000 leave $5,000 before investment changes or other adjustments. Reconcile that arithmetic to the recordkeeper's activity. If the ending statement shows a different amount, identify the missing transaction instead of labeling the difference rounding.

Keep participant restoration and correction entries identifiable. If a rehired employee's account must be restored under the plan's terms, preserve the administrator's instruction and the funding source. The person reviewing available forfeitures should see obligations already committed against the balance.

Have the administrator or benefits counsel identify the permitted uses under the plan and applicable law. The IRS's 2023 proposal discusses uses such as plan administrative expenses, employer-contribution reductions and allocations to participant accounts, as specified in the plan. That proposal should not be treated as a substitute for the plan's actual provisions.

The IRS's June 2026 bulletin still describes those forfeiture regulations as proposed and discusses permitted reliance before final applicability. Ask the adviser to verify the current rule and the plan's chosen treatment when authorizing a use. Preserve that conclusion, including the applicable timing, rather than applying an unverified universal deadline from an old summary.

If several uses are permitted, record the authorized decision and any fiduciary review required for the choice. Finance's preferred reduction in cash funding is an input to that discussion. It does not establish that the plan administrator has approved the particular transaction.

Match each approved use to the resulting plan transaction. For a reduction in employer funding, reconcile the gross contribution obligation, forfeiture amount applied and cash actually deposited. Keep participant allocations visible so a correct net bank debit cannot hide an incorrect allocation.

For an expense payment, retain the administrator's approval, eligible invoice and plan payment record. For a participant allocation, obtain the account-level confirmation. Update the rollforward only when the transaction's status is known and preserve any rejected instruction as an open item.

Give the next reviewer the remaining balance by year and its approved disposition timetable. An aging schedule with an assigned administrator makes unresolved forfeitures visible before another annual reporting cycle begins.