Short plan year and testing

[Guest CAM223]

We have a plan changing from a fiscal to a calendar plan year. We will have a

short (1 month) plan year. The plan uses the prior year testing method. For the calendar year following the short 1 month plan year, is it proper to use the NHCE

%'s from the 1 month year?

[Guest Midas]

The proper way is to use the short plan year's NHCE ADP/ACP %. When performing the short plan year's current rates to use in the following plan year, compensation can be the plan year (the short plan year) or the calendar year ending in the short plan year. Use the plan year (short period) compensation to get the highest %s to use in the following year.