DATAIR 401(k) ADP Test Result

[Guest ChopperPilot]

Background Info: I'm a CFP reviewing a prospective clients 401(k) plan and their failed 2002 ADP test. We're unable to reach the TPA who is ill which is prompting this post. We've learned the TPA uses DATAIR. There are 43 Not Otherwise Excludable NHCEs, 16 Otherwise Excludable HCEs, and 4 Not Otherwise Excludable HCEs. The test result is providing "Suggestions to Satisfy Test". But, there are two Distributions columns, the first is "All EEs" with a total distribution amount of $5,764, and the second column is called "Test Sep." and that total distribution amount is $3,605.

Which column/amount is the client to use? We understand there is a deadline approaching for corrections - March 15th. Thanx.

[Guest km6719]

It is extremely difficult to provide you with an answer when not being able to see the test. It appears that the TPA tested certain participants separately in order to reduce the amount that is required to be refunded to HCE's in order to satisfy testing. There are other ways to satisfy testing without refunding any monies. One way is a "bottom up QNEC contribution" that has proven to be the least costly way to correct tesing failures. I suggest that if you can not get the TPA to answer your questions, you contact another TPA that can review the test for you.

[Guest kgsingletary]

I am currently using DATAIR to administer 401(k) and Profit Sharing Plans...

Datair automatically runs the test both ways (incld otherwise excldble and not) if your plan's eligibility is less than statutory requirements. It produces corrective measures for both ways of running the test - hence columns that say "All EEs" and "Otherwise Excld". If your document allows you to test Otherwise Excludable participants separately, then you can refund the amount in this column which is sometimes less than the refund in the "All EEs" column. If ever in doubt refund the amount under "All EEs" + gain/loss.

Also, your TPA would have to calculate the QNEC separately from the ADP/ACP test if you chose to go that route in correcting the failed test.

Hope this helps!

Kim