ADP/ACP Mutliple Use correction

[Guest GS1100]

Is there any advantages/disadvantages to choosing to reduce the ACP to correct multiple use? What about ADP?

A plan's adoption agreement elects to reduce both ADP and ACP for multiple use. This seems like an odd election that will result in the greatest refunds for the HCEs.

Any opinions?

[Tom Poje]

if you only reduce ADP to pass multiple use, you might have to forfeit related matching contributions. thus the hce ends up with less, since he will not receive a distribution of the forfeited amount.

[MWeddell]

I've drafted plan documents where the ADP or the ACP is reduced, whichever one minimizes the number of employees receiving corrective refunds.

If ADP is reduced to a point where associated match must be forfeited, then the document should be drafted so that the match is forfeited simulatenous with running the ADP / ACP / multiple use test. Otherwise, as Tom suggested, you run the tests, then you forfeit the hanging match, and you've essentially overcorrected the situation.