ADP testing question

[billfgrady]

If you have to consider one (and only one) NHCE for a given testing year but that NHCE has terminated prior to the start of the testing year (and won't receive any compensation) what is the nhce adp for that year?

[Mike Preston]

Why do you have to consider the NHCE if the NHCE terminated before the beginning of the year?

[billfgrady]

So in a plan using the prior year testing method, I'm not stuck with an nhce avg. of zero if the only nhce (looking at prior year comp.) does not defer in the current year?

[Tom Poje]

your comment is confusing.

If you are using prior year testing, then whatever happens to a NHCE (comp and deferrals) is not considerred.

Now, if the NHCE deferred 0 last year, then that is a different issue, and possibily up for debate.

Sal Tripodi holds that if in the current year the plan there are only HCEs, you use the special rule under the regs, a plan that consists of only HCEs automatically passes testing. He holds that the testing method (prior or current) is a different matter and done 'after the fact' so to speak.

I am not so sure. The prior/current year rules were written after the HCE rule. I don't think the issue is clear. If anything, the plan could be amended to use current year testing and that would elimnate the problem. However, even that is unclear, when the plan can be amended from prior to current.