How aggressive is this? ACP testing

[imchipbrown]

I'm working on a calendar year plan. I've been asked to project the 2002 ACP percentage allowed for the HCEs.

There's been a lot of hiring the last few years, and employer doesn't match for Post-Doctorate fellows nor non-resident aliens.

To make the numbers work, I've basically said, to be in the ACP test for 2001, you had to be hired before 7/1/00. (There's a three month service requirement, but I've got no HCEs to put into the separate group.)

Rationale is that I could have a one year wait and an entry date of six months later.

Just wondering if this is aggressive number grinding.

[Tom Poje]

based on your notes, no, that doesn't sound aggressive - simply using the otherwise excludable option that is available.

I assume you are using prior year testing method as well.

I suppose if the match has a last day provision, then you will make clear to the client the numbers could easily change if ees quit.

With the elimination of the multiple use test for 2002 it makes the projection easier since now it is simply a '2 test' to worry about.

[imchipbrown]

Thanks, Tom

Just wondering. Do you know what a Post-Doctorate Fellow is? I mean, statutory employee or some other animal?

[imchipbrown]

As a follow on, can I also test under 410(B) excluding employees who haven't done 1 year, age 21 - even if there is only a 3 month wait?

I know that if you're allowed to defer under 401(k), you get a pass on 410(B). Can I assume that a match contingent on a deferral gets the same pass?

Finally, (here's the rub) if some employees are excluded from the match (the Post Doctural Fellows or PDFs), I need to pass the ratio % or Average Benefits Test. The PDFs excluded from the match are allowed to defer. If few to none defer, do I get to say they're benefiting?

[Tom Poje]

it sounds to me if you have the following:

a group of employees.

part of this group are PDFs, and a special class has been carved out for them. they can defer, but they will receive no match.

For 410(B)

the 401(k) portion is no problem. One who defers 0 is treated as benefiting.

for 401(m) all pdfers who have worked a year/age 21 will be treated as includable and not benefiting.

the pdfs will show on the ADP test, but are exclued from the ACP test.

[imchipbrown]

Oops, should have stated, it's a 403(B).

Don't have an ADP. Wouldn't the non-excludible (age/service) PDFs be in the ACP test?

[Tom Poje]

if there is no way you can receive a match you should not be included in the ACP test.

do not confuse this with 0 deferral = 0 match, so you have received a match.