Multiple Use Failure

[Guest CCarter]

Plan failed multiple use test by 0.05%. I've decided it's best to refund ACP money. Failed ACP test by 0.32%. Can I do the refunds so the plan passes multiple use test or must I get it to pass ACP test? Thanks!

[Tom Poje]

please provide the numbers for the test.

It sounds like what you are saying is that plan passes ADP, fails ACP, fails multiple use by even less than its failure of ACP.

This implies that deferrals could be 'shifted' from the ADP test to the ACP and the plan will probably pass testing without a refund.

By the way, you would first have to pass ACP befroe getting to the multiple use test.

[Guest CCarter]

The plan's test results are:

ADP for HCEs 4.09%

ADP for NHCEs 2.32%

NHCE ADP x 1.25 = 2.90%

Lesser of NHCE ADP x2 or +2 = 4.32%

ACP for HCEs 0.82%

ACP for NHCEs 0.43%

NHCE ACP x 1.25 = 0.50%

Lesser of NHCE ACP x2 or +2 = 0.80%

Because the plan fails both 1.25 tests but passes the plus 2/times 2 I tried the Multiple Use Test. The aggregate limit for the NHCEs is 4.86% which is less than the sum of the HCEs ADP & ACP (4.09% +0.82% = 4.91%).

I want to refund ACP money. So my question is do I have to refund according to the ACP test (which fails by 0.32%) or the Multiple Use Test (which fails by 0.05%)?

Thanks!

[Tom Poje]

This is a perfect example

first, lets try something.

ADP ACP

HCE 4.09 .82

NHCE 2.32 .43

so both tests pass the 2 test.

now, check the document to see what can be used in the ACP test. For example, look for something like language that says '...and deferrals not used in the ADP test may be used in the ACP test' so on paper you move the numbers or 'shift' the data to

4.00 .91 (moved .09 from ADP to ACP)

2.00 .75 (moved .32 from ADP to ACP)

now the ADP still passes, and 1.25 * .75 = .94, so ACP passes and there is no refund. This is legitimate!!!!!!

the regs contain a similar example in 1.401(m)-1(d) example 3 (iii)!

you would only have to refund by the multiple use failure, and again, only if your document doesn't allow you to use deferrals in the ACP test. If the document hasn't been restated and doesn't contain this type of language, make sure to put it in when you restate.