ADP and Prior Year Compensation with a Multiple Employer Plan

[Guest aferris]

Hello:

We currently have a Multiple Employer Plan and are a PEO. I have a client who states that she was provided the option to use prior or current year compensation for ADP testing. Under our MEP, we only allow for prior year. I understand that most PEO's with MEP's have used prior year as a default, however, I'm wondering if this is a regulation that we have to abide by?

Can anyone help cite a reg that would prove that MEP's are required to use prior year compensation for purposes of ADP testing?

Thanks!

Bella

[Archimage]

That is the first time I ever heard of that. I tried finding something on it and I was unsuccessful. As far as I know, mulitple employer plans could use either prior or current year testing, as long as the regs for switching are followed of course.