Forfeitures occur when a terminated participant is not fully vested in employer contributions and receives a plan distribution. Forfeited amounts are placed in a forfeiture account for later use by the plan sponsor. Forfeiture accounts are typically used to pay plan expenses, with any remaining amounts used to reduce employer contributions or allocate to participants. Forfeitures must be used or allocated by the end of the plan year and cannot be carried over to subsequent years. If a plan fails to properly allocate forfeitures in a timely manner, corrective actions include reallocating forfeiture amounts and revising allocation reports in accordance with IRS compliance programs.