Forfeitures did not occur

401(k) plan provides that unvested amounts are forfeited upon the earlier of 5 consecutive breaks in service or the date of distribution or deemed distribution.  Company is about to terminate the plan and just discovered that, while forfeitures have been occurring when employees terminated employment and either took a distribution or were deemed to take a distribution (e.g., terminated with no vested interest), no forfeitures have been occurring for individuals who didn't have a distribution or deemed distribution but have incurred 5 consecutive breaks in service.  So, these former employees still have unvested amounts credited to their accounts more than 5 years after their termination.  The plan provides that forfeitures are to be used to offset employer contributions, or reallocated if forfeitures are greater than the contribution obligation.

Any ideas as to what to do?  Can the company simply cause the forfeitures to occur now and transfer those amounts to the forfeiture account?  Or is a correction required for past years, and if so, what would that look like?

Scott, although your post contains only a brief summary of the facts, I think the "textbook" answer is that the plan needs to make a VCP application to IRS. Depending on things like the clarity of the plan language, what the SPD said, and the statements the participants have received, the IRS might well allow you to correct by forfeiting the amounts now and reallocating the forfeitures retroactively to the active and inactive participants to whose accounts the amounts should have been allocated over the years if the forfeitures had occurred timely. Note that there is at least a good argument that in this case the forfeitures always exceeded the contribution obligation, which is why the amounts would might need to be reallocated to prior years. If based on facts and circumstances that is an unduly burdensome correction, the IRS might let you shortcut it. Would depend on many factors.