Guest SWadd Posted November 9, 2010 Report Share Posted November 9, 2010 I am hoping that a poster could clarify a few questions I have regarding ADP/ACP Testing for a plan that terminates during their plan year. First - my understanding is that a plan termination does not end the plan year unless there are specifics in an amendment/board resolution that states "the final plan year will end...". In the absence of such language, the test would be completed with the compensation for the entire plan year. So, for example, if a calendar year plan terminates effective 9/30 however the company remains in business through the end of the year the compensation used for testing would be the comp for the entire plan year unless an amendment is adopting changing the plan year end. Is this logic sound? Also, when does the clock start clicking to have corrective distributions removed from the plan if there is an ADP/ACP failure? Per Sal... Treas. Reg. §1.401(k)-2(b)(v), which states that when a plan terminates, corrective distributions to pass the ADP test must be completed as soon as administratively feasible after the date of termination, but in no event later than 12 months following the date of termination of the plan. The same rule is stated in Treas. Reg. §1.401(m)-2(b)(2)(v) for corrective distributions to pass the ACP test. This lends some support to the idea that the plan year "ends" with the date of termination for testing purposes. So, if a calendar year plan terminates 9/30 the clock starts 9/30 no 12/31. However, the last sentence seems to contradict my understanding that terminating the plan prior to the plan year end does not automatically change the plan year end to the termination date. Any clarification on this would be greatly appreciated. Link to comment Share on other sites More sharing options...
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