ACP/Top Heavy Adjustments

[pbarrett]

I have a 12/31/02 401(k) plan and just did the testing and found the plan failed the ACP testing. The HCE need to have funds distributed. I will be sending checks to two HCE less losses and reporting the amounts as income for 2003. One of the three HCE is not vested. Questions:

For deduction purposes, for the 2002 year, can the employer write off the entire match contribution even though part will be refunded in 2003?

Second, they have to make a top heavy contribution, can I forfeit the non-vested highly's excess match and use it to help fund the top heavy? In other words, reallocate it just to the NHCE needing a top heavy contribution (some of the NHCE do not need a top heavy contribution due to the match amount they received.) I didn't see anything in the doc except that it is to be forfeited. My guess is it would have to be reallocated to all eligible participants.

Thanks for any input.

Pat

[ccassetty]

How does your document say forfeitures are to be used? If it allows them to reduce employer contributions, I don't see why you couldn't use them towards the top heavy.