Manual ADP/ACP test

[Guest nbs]

Does anyone have a spreadsheet set up that will do the calculations for the ADP/ACP tests? I have a controlled group that I need to run the tests on, but Relius isn't set up to handle that. They suggested the spreadsheet! Can anyone help??

[Tom Poje]

well, that shouldn't be a bad calculation.

run your test on each plan. I have modified the Relius report, but I believe their report should print the following:

(Sum ({PLANEEKMTEST.ADPPCT}, PLANEEKMTEST.HCECURRYRCD})

Sum ({@HCE}, {PLANEEKMTEST.HCECURRYRCD})

That first one is simply the sum of all the HCEs ADP pcts

The second one is the count of HCEs.

Thus if you take the value from plan 1 add the value from plan 2 you would have total ADP Pct for the aggregated plans.

Do the same for the HCE count, and simply divide the numbers to get your avg for the HCEs. Do the same for the NHCEs. watch out if you are using top paid group election.

Watch out if your eligibility is different between the plans.

Hopefully you will not fail.

(Option 2 would be to put all people in one big plan and code up in divisions. you can always print reports by divisions, but run the tests combining the divisions.

[Guest nbs]

Tom,

Thanks for the reply. I ended up creating one big plan for all employees of both plans so I could run the ADP. (One plan is a PS only with 140 ees; the other is a 401(k) with 12 ees). I needed to get a QNEC and QMAC amount so I guess this is the easiest way.

Since the NHCs of both plans are getting an allocation of the QNEC and QMAC under the k plan, the k plan is now able to pass coverage.

Am I forgetting anything? It seems to easy.

[Tom Poje]

if it seems to easy, it probably is....

A QMAC, since it is a match, is treated as part of the 401(m) coverage test.

A QNEC is a nonelective contribution and is not part of the 401(k) for coverage.

Ugly. you may have passed the ADP test by giving QNECs, but it will not solve coverage.

don't you have enough HCEs in the profit sharing plan who are not benefiting under 401(k)????

[Guest nbs]

There are 11 HCs in the PS plan. 2 HCs in the k plan. {These 2 are the problem. They are only HC for 2002 because of a one time bonus they got in 2001! They usually only have NHC in the k plan.}

I ran the 410(B) for the k plan with all employees after allocating the QNEC and QMAC. All components are passing according to the test, but now I see why. The 401k component is recognizing everyone as benefitting because they're showing as eligible to participate. Only the 2 HCs and 5 NHC actually were in the plan.

How do you get the deferral portion of the plan to pass coverage? I guess I thought the QNEC would take care of that.

[Tom Poje]

ok, I am a bit swamped with work, but I am fool enough to stop to try and help. maybe I missed something in the following logic.

Lets say I choose not to aggregate the plans.

401k

2 hce

10 NHCE

PS plan (includable not benefiting under 401(k)

11 hce

129 NHCE

NHCE ratio = 10 / 139 = .07194

HCE ratio = 2 / 13 = .15385

plan ratio = 46.76% fails ratio % test, but would pass safe harbor %.

so if plan passes average ben % test, plan passes.

without seeing any numbers, its obvious any type of QNEC given should enable the average benefit % test to pass.

pre QNEC test:

On relius, if you put people in divisions, you could test the 401k division and add 11hce and 129 NHCE in the box 'number of nonbenefiting ees' or whatever it says.

[Brian Gallagher]

so, nbs, i guess the answer is no. no one here has a spreadsheet to calculate it.

i used to have one, but i can't find it. sorry.