Forfeitures and money-purchase pension plan contributions

[Guest sampat]

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?

[wmyer]

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.