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Hello All, one of plan has After tax contribution and there are allocation conditions for match (1000 hours for Active & last day requirement). In ACP test do we need to include all, irrespective of the allocation conditions as everyone is eligible to make after tax contributions which are tested under ACP test. Thanks!

I hope someone can verify that I understand this correctly. 401(k) plan has 100%-4% enhanced safe harbor match. They added a discretionary match of 100%-15% for NHCE only in 2019. Since the discretionary match exceeds 4%, ACP testing applies. If I test all of the matching contributions together the ACP test fails - a lot of NHCE still didn't participate even with the extra generous match. However, I believe 1.401(m)-2(a)(5)(iv) allows us to exclude employees who are only receiving the 100%-4% enhanced safe harbor match from the ACP testing. Since that group to be excluded includes all of the HCE, the ACP testing automatically passes. Is that correct? In other words, as long as the HCE are excluded from the discretionary match, ACP is going to be automatically satisfied regardless of the discretionary match formula being used for the NHCE.

Looking for some expert opinions on a strange case (at least for me). A 401(k) plan has enhanced Safe Harbor Match (100% - 4%) that only satisfies ADP. There is a discretionary match of 25% up to 20% for a small group of NHCE so ACP testing is required (don't ask why - a previous TPA let them put it in without explaining the ACP issue). There is a large population of Service Contract Act employees who receive prevailing wage contributions in the plan. The plan document specifies that prevailing wage contributions are QNEC's that offset Safe Harbor Match. When running the ACP test, should all of the prevailing wage contributions be included for all of the SCA employees - with the 10% limit taken into account? I am having difficulty finding an answer and our software doesn't want to do it. I can usually rely on our software to do the right thing, but I think the prevailing wage contributions should be included in ACP based upon the Safe Harbor Match offset.

Good Morning to All! I have been asked to post the following question to the group: "The concept of a back door Roth has been talked about lately through the use of Voluntary After-tax Employee Contributions into a 401(k) Plan that permits in-plan Roth conversions. It seems obvious that this strategy would be enticing to many HCEs wanting to effectively increase their salary deferral limit for a given year. But considering most NHCEs would not likely make deferrals of this sort, how do you pass the ACP test? It appears to be a real problem but perhaps there is some solution." Thank you in advance for any comments/experiences/advice you wish to share.

Plan suspended their safe harbor match as of 9/1/2019. PY is 12/31. There was no other match made for the year. Do I need to do both the ADP test, and the ACP test for the safe harbor that was made during 2019 prior to suspension?

If this is a breach of protocol I apologize in advance. I first tacked it on to the end of an old thread and then I decided that maybe nobody reads old threads and that maybe I should start it as a new topic. Thank you. Hi to all! I'd like to tack my new question on to this old thread because they related to each other and even though I have read this 5 times I am still not sure how to handle my situation. I have an employer who wants to motivate his employees to defer more and in his ideal world they would defer 15% of pay and he would match 10%. No, for real, I really do have someone this generous! For 2019 he has already distributed a SH Match notice promising the employees dollar for dollar up to 6% of pay - already really generous. He's trying to figure out how to structure a discretionary match on top of the SH for 2019 that would reward employees who put in more than 6% of pay, in such a way that if someone put in 15%, they would end up with a total of 10% in employer match. He understands that at least some if not all of the match would be subject to the ACP test and that if the test fails, refunds might have to be made, and he doesn't care. At first he, and we, were thinking that he could do a discretionary match of 44.44% on deferrals between 6.01% and 15% of pay. For the guy who defers $15,000 on a $100,000 salary, this would get him a $6,000 SH match plus a $4,000 extra match for a total of $10,000. Then we started reading passages about having to calculate the discretionary match on all of the deferrals, not just the percentage over 6% of pay. In that case, the extra match would be 26.66% of all deferrals up to 15% of pay deferred. This would get our $100,000 person the $6,000 in SH Match plus the extra $4,000 in discretionary match for a total of $10,000. However, of course, it would increase the cost of the lesser paid/lower deferring people. I don't think this employer minds doing this, if the rules require it. He just wants to know what to do within legal parameters to achieve his goal. So here we go: 1. Must we structure the discretionary match to include all deferrals from the first dollar? 2. What exactly goes into the ACP test? The discretionary match only, or the total match including the Safe Harbor? We mostly deal with employers who won't even pay a Safe Harbor match, let alone do more, so it just hasn't come up before. Thanks in advance for helpful advice!

A payroll company didn't limit the comp of an HCE to $260,000 when calculating the match for the plan. I understand the excess match gets forfeited, but is it included in the ACP test first? I stepped into the way-back machine and remember learning long ago that 402(g) excess contributions by HCE's get included in the ADP, but can't find any similar information on the ACP test. Any guidance is appreciated I realize now, I should have posted this in Plan Defects. The link there (http://benefitslink.com/m/qa.cgi?db=qa_plan_defects&n=122) only seems to speak to ineligible employees. Someone else asked this question, but only got that link as a response. Thanks.