catch ups

[Tom Poje]

is this one too aggressive or does it fall under the rules?

HCE 5 4

NHCE 3 1

Plan passes ADP. now, I shift 1% of NHCE to ACP and arrive at

HCE 5 4

NHCE 2 2

plan now passes ACP, but one of the rules for shift is plan must pass ADP afterwards. It doesnt.

so can I now treat 1% of HCE as catch up?

[jquazza]

Tom,

I think there was a similar discussion few months back. I think it is too aggressive. The mere fact that you don't have refunds because deferrals can be reclassified as catch-up contributions doesn't make your ADP test pass. You have a failing ADP which is being corrected by a recharacterization of the contributions.

[austin3515]

IMHO, the definition of too aggressive varies from client to client. Some clients are willing to accept risk tomorrow to leave 1,000's in the Plan.

I don't think it's "pre-funding-a-year's-deferrals-to-accellarate-the-deduction" bad. I think you could at least defend yourself IF the IRS questioned it. Don't know if you'd win the argument, but again, some client's may find it's worth the risk.

I do agree with what jquazza said, but I also don't think you'd be asking the question if it was that off the wall.