I am trying to find out what is the impact of forefeitures from a money-purchase plan. The plan has a cliff vesting schedule 100% after three years. The employee leaves after two years and all his money is unvested. The forefeited money would revert to remaining participants in the plan. I am not sure how it is distributed among the remaining participants. If money purchase plan was set at 25% of the compensation, would the corporation be able to contributed 25% in addition to the forefeitures?

The plan document or adoption agreement should probably specify if forfeitures are being used to reduce or supplement the required pension contribution. However, no one can go over 25% of compensation, so if you have a 25% pension you would have to use the forfeiture to reduce contributions. The plan document should also state method of allocation, which might be prorata based on compensation.