nonforfeitable

Nonforfeitable is an adjective used in law and finance to describe rights or benefits that cannot be forfeited or lost, typically because of vesting, statutory protections, or contractual terms. The concept emphasizes security of earned or guaranteed interests even if circumstances change, such as a job ending or a policy being otherwise terminated.

In the context of employer-sponsored retirement plans and other compensation arrangements, nonforfeitable rights arise through vesting. When a benefit vests, the participant retains the right to that portion regardless of future employment status. Vesting can be completed after a specific period (cliff vesting) or gradually over time (graded vesting). Nonforfeitable rights are often protected by law in applicable jurisdictions, with regimes such as the United States’ ERISA providing framework for how vesting and forfeiture may occur.

In life insurance and related products, nonforfeitable provisions protect certain policy values from loss if premiums lapse or other conditions arise. Nonforfeiture options, such as cash surrender value or reduced paid-up insurance, are designed to preserve a portion of the policy’s benefit even when premium payments cease, ensuring that some value remains nonforfeitable.

Legal and regulatory contexts emphasize that once benefits are nonforfeitable, they cannot be forfeited for the reasons specified by the plan terms or law. The term is often used to contrast with forfeitable rights or unvested benefits that may be lost upon withdrawal or termination.