I hate to reveal my ignorance, but Quantech's help files are not helping me answer this question. I am in the ADP/ACP test window, and I have selected the "Year to Date Only" option. Under the "Testing Options" tab, I am using prior year NHCE data. My question is, What is the "apply statutory exclusions" (listed under Testing Methods)? I noticed that when it is turned on, the allocation received by two part-year participants is not included in the testing. Your help is much appreciated.

the only ignorance is in not asking.

Statutory exclusions allows you to exclude employees if the plan has more
generous entry requirements than allowed by law.
In other words consider a plan that has immediate eligibility.
The law requires employees to enter after age 21 and 1 year of service. (Actually you have to enter 6 months after meeting the requirements)
Therefore the system will look at Date of birth, see when you turn 21, add 6 months and exclude you if you fail at plan year end or your date of termination. The same goes for Date of Hire. (Note, it is 6 months after meeting eligibility or 1st entry date of the plan if earlier)
If you have someone who was always parttime, (Never 1000 hours), they should be excluded as well, though I don't think the system checks for that)
Note in 1998, if an HCE falls in this group of 'excludables', you would need to actually run a test including just those employees.
This is a great feature since 1st year employees rarely defer.

Dang it. I forgot. If you are using prior year testing, you have to make sure your prior year testing numbers also used 'statutory exclusions'. in other words, since you asked, you probably need to go back and run last years test to determine the NHCE average under 'statutory exclusions'.
then compare to this years HCE avg.