In the following example, what would be the correct top-heavy contribution?
1998 Top-heavy contribution required: 3%
1998 Profit sharing contribution: 1%
1998 QNEC contribution: .5%
1998 Reallocated forfeitures (all ee's): .5%
Does the employer make a 1.5% or a 1% top-heavy contribution?
We have been operating the plan where reallocated forfeitures are only used to determine the minimum top-heavy contribution, but they are not used to satisfy the funding requirement. We are doing it this way because forfeitures are an employer contribution received in a prior year and were accounted as a contribution in a prior year. But now am confused by Reg 1.416-1, M-7.