Top Heavy Test & Forfeitures

[Guest A. Rostosky]

When doing top heavy testing, is the forfeited portion of a distribution included?

[Erik Read]

Are you talking about the current forfeitures or prior years? If the allocation of the forfeiture has occured, yes, it should be included. If it hasn't occured, and your projecting the allocation, no, I wouldn't include that amount this year, until it $ certain.

Any other oppinions or citations for inclusion or exclusion?

[Guest A. Rostosky]

Yes, the forfeiture did occur during the year. So you're saying it should be included, right?

[Guest mo again]

Are you referring to the reallocation of available forfeitures, or to the forfeiture itself? I would agree with ERead if the former. If the latter, it should not be included as a distribution during the lookback period.

[Guest A. Rostosky]

I was referring to a participant who terminated during the year and her only contributions were unvested profit sharing which was totally forfeited.

[Richard Anderson]

If the forfeitures are reallocated, then they would not be added back, because they never left the plan.

If forfeitures are added to the employer contribution and allocated along with it, then also the forfeitures didn't leave the plan.

But, if the forfeitures reduce the employer contribution or are used to pay plan expenses, then forfeitures have left the plan. Even so, I don't think that they would be added back along with the distribution. Both the IRC and Regs. refer to adding back distributions only.