ESOP & non-ESOP adp/acp testing aggregation?

[jaemmons]

Because the deductibility of pass through dividends depends on the employer to sponsor a "statutory" ESOP (one primarily invested in employer securities, etc.), does this preclude them from aggregating for adp/acp tesing purposes as allowed under the final 401k/m regulations?

In other words, if the ESOP contains a 401(k)/(m) component, can the ESOP and non-ESOP parts be aggregated for adp/acp testing, without affecting the tax deductibility of the pass through dividends?

[MWeddell]

Yes, the ESOP and non-ESOP portions must be aggregated for ADP / ACP testing beginning in 2006 and may aggregate in 2005.

A deduction for pass-through dividends or dividends for which the participant could have elected to have them passed through is allowed only for ESOPs. It's irrelevant whether the ESOP portion of the plan is aggregated or not with the other portion of the plan for ADP / ACP testing.