Are forfeitures counted for top heavy testing?

[Guest TGM]

Forfeitures under this profit sharing plan occur in the year an employee terminates service and receives a distribution. Forfeitures are not allocated until the end of five consecutive one-year breaks in service. Forfeitures are held in a separate account for the years before they are reallocated and are credited with earnings during this time. Top heavy is determined by dividing key employee account balances by all other account balances. Accounts and distributions of former employees during the determination year and prior four years are included to determine whether the plan is top heavy. The question is whether forfeited amounts held by the plan pending five consecutive one year breaks in service are (or can be) counted in the denominator when determining if a plan is top heavy? I have not been able to find any guidance on this issue in IRS rulings. Any insight would be appreciated.

[Disco Stu]

I'd like to ask a quick question before I put my two cents in. What's the point of moving forfeited dollars to a suspense account immediately upon distribution, if you're not going to reallocate them until a 5 year BIS? Doesn't that make for a recordkeeping nightmare?

Given this scenario however, I would say that the forfeited amounts belong to the individuals that forfeited them until such time as they are allocated to someone else's account. They should be counted in that fashion for purposes of the top heavy test.

[Guest ypartridge]

I concur with Disco