Are amounts forfeited included in the one-year add back when determining the top heavy ratio?

For top heavy account balance determination in a DC plan, are unvested amounts that are forfeited included when adding back distributions for participants who terminated during the year? For example, a participant with a total account balance of $10K, of which $9K is vested, terminates during 2017 and takes a distribution during 2017. Would you add back $10K or $9K? EOB gives an example that says, "the former employee's account balance must be included in the top heavy ratio" [my emphasis added]. I can't seem to find anything definitive in the Regs., but logically, it seems like you would add back what would have been the full value of the account (unvested portion included) since that's the amount you would include for someone who wasn't terminated.

Why on earth would you add amounts that have been forfeited back into a top heavy test? They weren't distributed to the participant in the 12 month look back period and they aren't part of the participant's balance on the determination date.

But the amount forfeited was part of the participant's account balance during the period, just like the amount distributed was. Neither amounts were in the participant's account as of the determination date.

What part of the word "distribution" do you think incorporates "forfeiture"?

If forfeitures are to be reallocated in the same year they occurred, then they will be a part of someone's balance and therefore included.

If you are trying to say without them plan is 60.2% top heavy, but if I add them back the plan will be 59.8% and that's what I want to do so the plan isn't top heavy, that makes no sense because that is assuming none of that amount will be allocated to key employees.

There are a few things that raise the question in my mind - 1) if the participant terminated during the year but didn't take a distribution, his entire account balance, vested and unvested, would be attributed to him and included as part of his balance. It makes me wonder if the intention of the add-back is to put those participants that actually took distributions in the year they terminated in the same position as those that didn't. Both would fall off in subsequent years, so they're getting the same treatment in that regard; 2) I could interpret "distribution" in this context as meaning amounts distributed from the participant account, whether actually paid to the participant (or rolled over) or forfeited, especially considering...3) the use of the term "account balance" as opposed to "vested account balance" in the EOB, as I pointed out in my original post.

It makes sense to me what you're saying about the forfeitures staying in the plan, Mike - I guess what I'm postulating is that the forfeiture would be attribute to the specific participant that took the distribution for that one particular year, being the year of termination, in light of the treatment of participants who terminated during the but didn't take a distribution. In subsequent years, the forfeiture would either be out of the plan if used to pay expenses or captured in other participant's accounts via reallocation of the forfeiture.

You are thinking too hard.  A forfeiture is not a distribution. Period. Full stop. A forfeiture is a specific event on a specific date that takes place or does not take place.

Yeah, I tend to do that! 

But you get my point about wondering if the intention of the add back is to put those that terminated during they year in the same position, whether they took a distribution or not?

BTW, thanks for the discussion on this, I follow you guys a lot and always respect what you have to say.

No, I don't get your point because there is nothing at all that has ever even hinted at that.  I know it is fashionable these days to make stuff up, but I try to avoid it. YW..

Alright, conventional wisdom it is!

Thanks again.