Reclassifying Deferrals to Pass ACP Test

[Guest KMP]

I believe that if you are passing your ADP test but failing the ACP by a slight

margin you can reclassify deferral contributions not needed by the ADP test as matching contributions in order to pass the test.

I also think that to do this you must pass the ADP test before and

after the move, and it is just a "paper" move.

My question is if the plan fails ADP but no refunds are required due to

reclassifying deferrals as catch-ups, does this mean that you can't use

deferrals to satisfy ACP?

[Tom Poje]

As to your first comments, I would also add that the document should indicate that deferrals are able to be used in the ACP test.

Some documents might simply describe the ACP test as consisting of match and after tax contributions.

others add "and those deferrals not used in the ADP test" or something similar.

Now, as regards to what you describe, I would hold no one knows for sure.

Even the ERISA Outline Book would describe it as Conservative approach vs aggresive approach.

The example they use involves corrective distributions for the ADP test being made and then possible shifting (11.179 2003 edition)

Personally, I lean toward the aggresive approach