ADP/ACP testing and non-calendar year plans

[Guest LiLi]

This was news to me, but IRS Reg 1.401(k)-1(g)(2)(i) apparently allows a 401(k) plan with a non-calendar Plan Year to choose to define Compensation based on the calendar year. However, for purposes of ADP/ACP testing I don't see a similar opportunity to elect to look at deferrals (or employee/matching contributions) over the calendar year.

Am I interpreting the Regs correctly? Wouldn't this lead to unpredictable ADP/ACP test results if employees are hired late in the calendar year. For example, if a plan has a 7/1 - 6/30 Plan Year and an employee is hired 12/1, he would end up with a super high actual deferral percentage when dividing 6+ months of deferrals (12/? - 6/30) by 1 month of Compensation.

I have a new plan doing this and I'm not sure why.... Thanks!