ADP/ACP test...

[Guest RONNIE WASEL]

Plans testing results are as follows:

ADP ACP

HCE 6.42% HCE .81%

NHCE 4.17% NHCE 1.71%

For testing purposes only, is it possible to "move" 1% point from the ACP to the ADP to satisfy the test?

I know that you can "move" from ADP to pass ACP.

Thanks,

Ronnie Wasel

[R. Butler]

I am fairly certain the matching contributions have to be QMACs to be used in the ADP test. Probably should review 1.401(k)-1(B), specifically 1.401(k)-1(B)(5) for rules on QMACs in the ADP test.

[Guest yukon]

Section 1.401(k) - 1(B)(4)(ii).

I think you can only shift from ADP to ACP. And the ADP must be passing prior to any transfer.

[Guest GAPPension1]

You can only "shift" from ACP to ADP if the matching contributions are 100% vested (or a QMAC). Also, if this is a pre-EGTRRA plan year starting on or before 01/01/2002, Multiple Use Test (MUT) still applies. If this is the case, make sure the "shift" does not cause any problems as far as passing MUT as well as ADP/ACP goes. From the numbers you posted it may not be necessary to "shift" 1% (which can only be done if match is fully vested). Break down the MUT limits and figure out the lowest amount you can "shift" from ACP to ADP that will meet all relevant tests (ADP, ACP, and MUT).

[R. Butler]

100% vesting alone doesn't make the match a QMAC, certain distribution restrictions also apply to QMACs.

[Guest GAPPension1]

Oops.....

Just caught my own typo. MUT is repealed for plan years beginning on or after 01/01/2002. Any plan year beginning prior to 01/01/2002 is still subject to MUT.

Sorry about that.

[Guest RONNIE WASEL]

GAP:

Actually, this plan is a fiscal year end that runs from 9/1/02 to 8/31/02.

Does that change anything? Or it appears that it still fails the ADP.

[Guest GAPPension1]

Ronnie,

If this is a 09/01/01-08/31/02 plan year, MUT still apllies. "Shifting" from ACP to ADP can only be done if the match is fully vested AND subject to the same distribution restrictions as 401(k) salary deferrals, plus "shifted" contributions from ACP to ADP are to be excluded from the ADP test. Mr. Butler was kind enough to point out the ommission in my previous post.

If the match in your plan doesn't meet these requirements, then shifting cannot be used in this case.

If the percentages you gave in the initial post are current year numbers, you can give a "bottom-up" QNEC a shot. It could be a very inexpensive way for the employer to satisfy the tests, and since the ACP side is passing comfortably under the 125% rule, MUT is not an issue.

[Blinky the 3-eyed Fish]

Originally posted by GAPPension1

...plus "shifted" contributions from ACP to ADP are to be excluded from the ADP test.  

You mean shifted contributions are excluded from the ACP test.

[Guest GAPPension1]

Yes Blinky, it was a typo. "C" and "D" are too close in the keyboard. Thanks for pointing it out.