Prior Year ADP & Current Year ACP Testing

[Guest ChopperPilot]

Is it permissable to use the current year data for the ADP test and the prior year data for the ACP test for the same 401(k) plan? Other details: my client's 2001 NHCE ADP is greater than their 2002 ADP. They introduced a matching contribution in 2002.

[Mike Preston]

Yes, it is permissable if the document allows for it. I admit to being confused about your example, as something seems reversed to me. Maybe it is just because it is late and my eyes are seeing things (or not seeing things, as the case may be) backwards.

[Tom Poje]

prototypes have to be consistent (use the same testing method for ADP and ACP).

If the match was 'introduced' in 2002, that is, wasn't ever possible before then you should be able to use the 3% prior year rule. If match was simply never implemented in prior years, then I can see why they wants to use prior ADP and current ACP since ACP would be 0

By the way, if you want to 'shift', you also have to be consistent

[Guest JimD]

If you have not updated for GUST I understand you can use CY for ACP and PY for ADP even with a prototype or vice versa.

[Mike Preston]

I think it depends on the language in the prototype. But it was my understanding that prototypes were restricted to use of the same method. Then again, if a prototype was approved with the ability to test on an inconsistent basis, all you would need to do is confirm that your document says so.