Do forfeitures count towards the top-heavy minimum requirement?

Forfeitures do count towards the top-heavy minimum requirement. In the context of a top-heavy plan, which is one where key employees hold a significant share of the account balances, the rules are designed to ensure that non-key employees receive a minimum level of benefits. Forfeitures refer to amounts that are not vested—essentially, the unearned benefits held by participants who have left the plan without the right to a distribution.

When determining the minimum contribution required for non-key employees in a top-heavy plan, the plan’s forfeitures can be used to meet that minimum. This inclusion is significant because it can help the plan sponsor satisfy required contribution levels without incurring additional costs, thereby maintaining the plan's compliance with IRS regulations.

The importance of counting forfeitures towards the minimum is rooted in promoting fairness within the plan. By doing so, it benefits the non-key employees, ensuring they receive some level of benefit in a plan that is considered top-heavy.