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ADP Testing with lost deferral opportunity


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Owner only 401(k) plan with a match formula of 100% on the first 3% contributed.  The owner hires an employee who becomes eligible for the plan 1/1/19 but doesn't offer him participation in the plan.  The owner corrects for the lost deferral opportunity through 10/31/20 and the employee chooses to defer 5% effective 11/1/20.  Normally, the ADP test is done by disregarding the improperly excluded employees so 2019 ADP Testing should be all set.  Why type of ADP Test should be done for 2020?

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On 11/23/2020 at 8:54 AM, Jill said:

Owner only 401(k) plan with a match formula of 100% on the first 3% contributed.  The owner hires an employee who becomes eligible for the plan 1/1/19 but doesn't offer him participation in the plan.  The owner corrects for the lost deferral opportunity through 10/31/20 and the employee chooses to defer 5% effective 11/1/20.  Normally, the ADP test is done by disregarding the improperly excluded employees so 2019 ADP Testing should be all set.  Why type of ADP Test should be done for 2020?

Can't he elect safe harbor nonelective for the year and forget the testing?

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50 minutes ago, Bill Presson said:

Why?

Seems like deferrals are already effective in the plan.  I thought for plans like that, SH had to be for the entire year.

And for plans with no deferrals yet, you can add a SH, but it has to be for at least 3 months.

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22 minutes ago, BG5150 said:

Seems like deferrals are already effective in the plan.  I thought for plans like that, SH had to be for the entire year.

And for plans with no deferrals yet, you can add a SH, but it has to be for at least 3 months.

SECURE Act allows you to make existing 401(k) plans SHNEC retroactively. He's got until 11/30/20 to do it and use 3% and until 12/31/21 to do it and use 4%.

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