401k compliance testing

[Guest dstran]

when shifting adp percentages to pass an acp test.... doesn't the adp test have to pass prior to shifting to acp and also pass after shifting to acp?

i have a dilema with a provider......... adp and acp originally failed. provider took hce adp percentage that the test would need to be at to pass and shifted from that.

example: original adp test results: HCE ADP= 7.02%

NHCE ADP= 3.33%

HCE would have to be at 5.33% to pass test

original acp test results: HCE ACP= .21%

NHCE ACP= .08%

HCE would have to be at 0.16% to pass test

provider shifted adp to acp by utilizing the 5.33% number and shifting from that. can this be done?

thanks,

Kim

[Tom Poje]

original results

7.02 .21

3.33 .08

after deferral refund

5.33 .21

3.33 .08

shifting .33 (for convience, could be other amounts) from both HCE and NHCE

5.00 .54

3.00 .41

and now passes.

my understanding is this would be ok. If I recall ERISA Outline Book says maybe, but it is not clear.

somewhere in the back of my thick skull I recall reading the idea of the shift was to be able to use 'deferrals' not needed to pass the ADP to support the ACP test. certainly that is what has been done. I would agree that it is gray, but I take the aggressive position in this case and say it can be done.

with the numbers being that close before shifting, was ant consideration made for using comp - deferral for testing purposes.

[Guest dstran]

thank you.

do you have any erisa outline book info that references shifting?

Kim

[Tom Poje]

Kim

in the 2005 edition it is 11.216

ugh. making a lazy jerk like me look it up.