ADP testing on terminating plan

[Guest chris4013]

If a company ceases operations on April 30, and begins the process of terminating it's plan, can ADP refunds be distributed prior to any plan distributions?

I understand it that they'd have to wait until after the plan year end (December 31). They could have a short year if all assets were distributed, but that would require distributing the potential adp refund.

Second question - same scenario except the company stays in operation. Deferrals cease April 30th and the plan begins work on terminating the plan. They expect all assets to be distributed in the following plan year. Would adp compensation include all of 2003 compensation or would it be up to April 30th?

Thank you

[Guest JEP]

Is there any reason why you cannot freeze the plan April 30. Test the plan, make refunds and payout the assets in a short plan year? I don't see the need to wait until the end of the plan year.

Send a communication to the employees that the plan assets will be distributed as of August 31, 2003. This would allow enough time to test, make refunds, etc. and still pay the assets out inside of 2003. Then you can file your final 5500 forms.

[Jean]

I believe you can pick a final distribution date (ie, 90 days out) to ensure that you give the participants proper notification that the plan is terminated, their distribution options, and if an election is not made, that the payment will be made directly to them. You may want to send a final notice via certified mail to non-responders. Of course, you may still have a lost participant issue.

Could you delay the HCEs distribution until the ADP test results are done (the future date you pick) and then do the return of excess contributions and distribution option on that day? Obviously they would need to be advised that you will delay it and still ask that they submit distribution election forms.

Comment -- you may run your ADP test based short plan year income (then prorate the $200k accordingly), or you can run it based on the calendar year that ends within the short plan year. 1.401(k)-1(g)(2). "The period used to determine an employee's compensation for a plan year must be either the plan year or the calendar year ending within the plan year. Whichever period is selected must be applied uniformly"