Correcting ACP with ADP Shift

[Below Ground]

Plan has both ADP and ACP using Current Year Method. Understand that you can shift Elective Contributions from ADP Testing to ACP Testing to help pass ACP Testing if 1) plan is required to pass ADP Testing, and 2) the ADP Test is satisfied when you include the Electives being shifted to ACP Testing. Question is related to second criteria. What if ADP Testing initially fails, but testing does not "actually fail" since Catch-Up Contributions are applied to Excess Contribution Amount; thereby eliminating Excess Contributions. I note that no amount of Catch-Up was needed for IRC 402(g), and that only $3,000 of the $5,000 allowance was used for ADP Testing. Can you still shift Elective Deferrals to ACP Testing, provided that the shift does not create Excess Contributions under ADP Testing?

[fiona1]

Good question - The following is from the EOB which may answer your question:

Chapter 11: 401(k) and 401(m) Testing - Section IX (QNECs and “shifting” of contributions):

Part C (“Shifting” elective deferrals to ACP test)

The plan may not apply the recharacterization rule first, and then determine how it wants to

shift elective deferrals to produce different testing results. All testing must be completed, including the

shifting of elective deferrals if desired, before determining whether there are any remaining excess

contributions that would be distributable under IRC §401(k)(8)© but are eligible for recharacterization

as catch-up contributions. This is confirmed in the preamble to the final IRC §414(v) regulations. See 68 F.R.

40511 (July 8, 2003).

[Below Ground]

What I'm "getting" is that recharacterization doesn't mean that testing did not fail. Instead, there just is nothing to distribute since the monies are now Catch-Up. I guess that this means that the second required condition of "no ADP test failure" is not met. (Point shifting is then not available.) Too bad since this would really help with quite a few plans. Anyone feel I am wrong?