ADP testing

[rlb64]

Employer's ADP test failed for 2005 using prior year testing. All employee are eligible to participate on date of hire.

The ADP test would pass if we carved out the otherwise excludable employees in 2004. I understand that if a plan uses prior year testing, the change to disaggregating the otherwise excludables doesn't help the first year because it's treated as a plan coverage change.

My question is since all employees are eligible, can't we just "declare" that disaggregating (for coverage) began in 2003, which would allow us to use the disaggregated 2004 NHCE ADP for 2005 HCE testing?

Coverage passes automatically regardless of whether we disaggregate.

I hope this makes sense to someone.

[stephen]

FWIW, If I understand your scenario I think you can look back to 2004 and apply otherwise excludables to the ADP test if it gives you better results. Unlike changing testing method from Prior to Current or utilizing top paid group for which the amendments have to be signed by the end of the plan year in which you are making the change for you can change form year to year whether you apply the otherwise excludable rule.

[dmwe]

I agree. Coverage issues shouldn't enter in.

You can go back to the 2004 ADP test and exclude the otherwise excludible and use that number for prior year. Pretty simple option.