Forfeiture of Vested Benefits

What Does Forfeiture of Vested Benefits Mean?

Forfeiture of vested benefits, in the context of insurance, refers to the legal process of taking from a beneficiary the rights to the benefits of a plan that they would have been entitled to. It may occur due to some sort of breach of contract or failure to meet certain conditions as stipulated in the policy.

Insuranceopedia Explains Forfeiture of Vested Benefits

The Employee Retirement Income Security Act (ERISA) is a law that regulates employee benefits, including pension plans, and sets forth minimum standards to the various plans. Thus, according to ERISA, forfeiture of vested benefits happens when the beneficiary commits any of the following:

• Experiences a break in service from the employer, or
• Terminates employment before the required service years and/or the vesting period is completed.

Employers may also set other conditions which, when not fulfilled, may result in the forfeiture of vested benefits. This includes employment termination for a cause, or conviction of a felony that violates the employee’s oath of office.