ADP/ACP testing of otherwise excludable in plan document?

[Guest Giovanni]

Is it required that the 401(k)(3)(F) and 401(m)(5)© optional

discrimination testing method regarding otherwise excludable employees

for ADP and ACP testing be stated in the plan document?

[jquazza]

They have to be incorporated by reference. If your document specifies the manner in which the plan will be tested without referencing the code sections and regulations, then you have to follow the terms of your document.

[Guest qualified plan]

jquazza, do you have a cite to support that position? My understanding is that such a provision need not be included in the document.

[jquazza]

You always have to follow the terms of your plan document. If your document was written in such a way that it does not give you any flexibility on the method used for testing, you have to follow the terms of your document.

Thankfully, most documents aren't drafted like that.

[Guest qualified plan]

Most documents don't address the mechanics of coverage testing. In that case, to answer the original question, the ability to exclude otherwise excludable employeess does NOT need to be incorporated by reference.

Agreed?

[Tom Poje]

I would hold Yes. I have never seen a document address the issue.

If anything the option to shift deferrals to the ACP test is the one I have seen limited. I have seen plenty of documents that say something like

ACP test consists of match and after tax contributions - hopefully whatever you come across also says ...and those deferrals not used in the ADP test.

[jquazza]

When a document says the adp/acp tests will be tested according to the regulations, that is incorporating the statutory exclusions rules by reference.

And by the way, I have seen attorney drafted documents where the exact method of testing is described without mention of the regs. Which means when there are changes to the regs, the attorney has to amend the plan to conform and gets more fees...

[Guest MES]

I agree that generally, otherwise excludables don't need to be in the document. The problem we have recently run into is with fail safe coverage language, when it would need to be included, so that the operation of the fail safe was clear.