Multiple Use test

[fiona1]

I have to run a 2001 nondiscrimination test because it was never done.

The ADP test passes. The ACP test passes. However, the Multiple Use test does not.

I know that in certain situations, you're able to "shift" elective deferrals from the ADP to the ACP test. I believe one of the requirements to shift is that you pass the ADP before and after the deferrals are shifted.

If I shift some deferrals from the ADP to the ACP, then the results of my Multiple Use test are a little better. It still fails, but the refunds will be slightly lower.

I'm trying to determine if it is acceptable to shift in this situation or not.

The ACP passes on its own. So I don't need to shift to pass the ACP. I can't find anything on this topic.

Anyone have any opinions?

[Tom Poje]

the example that was in the regs is as follows

HCE 10 10

NHCE 10 6

note in this case, the ACP actually failed

a shift is a 'paper move'

thus 2 was moved from NHCE ADP to ACP

HCE 10 10

NHCE 8 8

now plan passes no refund.

by the way you could also do the following

HCE 0 20

NHCE 0 16

which would also pass

Either ERISA Outline Book or Coverage and Nondiscrimination Answer Book have info on this topic. I would be surprised if 401k Answer Book didnt have any info on this.

old regs it was 1.401(m)-1(d) example 3(iii), 3(iv) new regs 1.401(m)-2(a)(6)(2)

[imchipbrown]

Are you under audit?

[dmwe]

Maybe I'm wrong here but don't people only give the multiple use test a try if they fail either the ADP or ACP? If each passes independently, why continue on to test multiple use?

[Tom Poje]

EGTRRA put an end to multiple use, so maybe you are only a 'rookie' in the business.

but here is an example

HCE 4 4

NHCE 2 2

so adp and acp both pass the '2' test.

however, multiple use said that this was forbidden. only one test could use the '2' test. thus the multiple use kicks in. we are all grateful it went away.

[fiona1]

Thanks for the responses...

No audit - thankfully.

Multiple Use was repealed for plan years 1/1/02 and after. This is a 2001 test so the MU test is necessary because a) it's prior to 2002 and b) both the ADP and ACP pass on the +2 test.

So I think it's safe to say that we're able to shift deferrals from the ADP to the ACP and then use those percentages to perform the Multiple Use.

And saying we're grateful that the MU test went away is an understatement !