Employee Contributions and ACP Test Safe-Harbor

[Guest t936]

If a plan includes a safe-harbor matching contribution for ACP test purposes but also allows for employee contributions, the employee contributions remain subject to the ACP test. In performing the ACP test, Notice 98-52 provides that the employer "may elect" to disregard the matching contributions if the ACP Test Safe-Harbor was satisfied. This language would appear to allow the employer the option to include the safe-harbor matching contributions with the employee contributions in the ACP test if the employer so desires.

However, I found a resource material that cites the 1996 Bluebook and provides that matching contributions cannot be included in the ACP Test with the employee contributions except to the extent that the matching contributions exceed safe-harbor amounts. Can anyone clarify the rules on this issue?

[MWeddell]

Notice 98-52 is more recent and taxpayers may rely on it. Eventually this'll get clarified whenever the IRS finally issues revised 401(k) / 401(m) regulations but in the meantime rely on Notice 98-52.