Compensation for ADP Test for new 401k

[Guest CSTS]

We're about to implement a new 401k Plan with an 11/01 effective date for 401k and Match. To eliminate proration issues, we made the Plan effective 01/01/06. Now we're faced with an odd question. In testing ADP/ACP, do we use compensation from 01/01 to 12/31 or 11/01 to 12/31. It will have a significant impact on whether we select current or prior year testing.

If we go prior year and use the whole year compensation, we won't get a favorable result for the 2007 Plan year. If we go current year and use whole year compensation, we won't get a favorable result for the 2006 PY. Hadn't envisioned this problem initially, but need to deal with it prior to 11/01. Thanks.

[Tom Poje]

for testing purposes youare allowed to use any definition that satisfies 414(s). (Unless the document is really poorly written) One of the definitions that satisfies 414(s) is 'from date of entry'. therefore you should be able to use comp from 11/1

[Guest jsample]

Changing the fact set a little - suppose a company has an existing profit sharing plan and subsequently adds a 401(k) feature effective 7/1. Can the plan use compensation from 7/1 to perform the ADP testing, even though employees were participants in the profit sharing plan 1/1?