Using own forfeiture for own top heavy min

Terminated participant took final distribution. Nonvested portion has been forfeited.

As this was the only non-key participant, the full forfeiture account balance is from this participant.

Plan has since decided to make a PS contribution for the prior plan year, and this participant is due a top heavy min 3% contribution.

Plan doc allows forfeitures to be used towards top heavy minimum contributions.

Doesn't seem to feel right, but any reason the top heavy minimum contribution cannot come from participant's own forfeitures?

You didn't bring it up, but no issues with partial plan term, right? Asking since "this was the only non-key participant"...

Assuming forfeiture was proper, I don't see a problem using it to fund the THM.

7 hours ago, RatherBeGolfing said:

You didn't bring it up, but no issues with partial plan term, right? Asking since "this was the only non-key participant"...

Assuming forfeiture was proper, I don't see a problem using it to fund the THM.

She quit, was not laid off or terminated by employer.

No issue with that. 

7 hours ago, TPApril said:

She quit, was not laid off or terminated by employer.

Then no issues with using the forfeiture.  In fact, you would probably create an issue if you don't use the forfeiture when available.

I've seen plan documents that say if the person's going to share in the allocation, they don't actually forfeit the nonvested portion yet....so maybe just spot-check your section there, too.

4 hours ago, Bri said:

I've seen plan documents that say if the person's going to share in the allocation, they don't actually forfeit the nonvested portion yet....so maybe just spot-check your section there, too.

Indeed, if the terminated participant had not taken their vested distribution, the forfeited amounts would not be available and the Plan Sponsor would need to make the actual cotnribution.

Even if the balance is less than force-out limit? Just curious.

8 minutes ago, Jakyasar said:

Even if the balance is less than force-out limit? Just curious.

Yes the vested balance is under the force out limit, when considered by itself. 

However, intent is to do a final rollover of vested balance of top heavy contribution since we are still within 180 days of Special Tax Notice.

In smaller companies I have always told my clients to keep the employee resignation letter on file since IRS takes the position that every termination is employer initiated.  It  helps in the event of an audit in the future.