ACP

[Guest 401knewbie]

I have a question:

My system did an ACP calculation as follows:

The participant had a salary of 300,000.

The deferral was 20,000 - over 50 year old.

The match formula was 5% of compensation.

The match the company made was $ 12,000.

The system said a refund was due of $ 774.10

Isn't this wrong? Shouldn't the match have been capped at $11,000 - 5% of the 220,000 comp limit and therefore the participant should forfeit $1,000 and not receive a refund? Should the ACP test then be rerun with a match of $11,000?

Thanks - I am just beginning my testing skills - I'll have more questions

[401_4_ever]

The two reasons your numbers could be off which I thought of:

Are you matching on the catch-up?

Is your system adjusting for earnings (or in this case lost earnings)?

[Guest 401knewbie]

It does match the catchup. But if that is the case, the 20,000 is 6.6% of the 300,000 or 9.1% of the 220,000. The cap is 5% (dollar for dollar on the deferral). So the match will not exceed the 5% limit in this case.

There is no adjustment for earnings.

[Tom Poje]

of course a lot depends on the software. and that is not to be negative one way or another against any particular software.

based on what you said, it sounds like the match should have been limited $11,000.

so for example, On Relius (and I of cousre have no idea if that is what you are using, using that as an example only), is you ran a formula capping at 5%, then that is what the indiviudal would receive. However, if you were to enter 12000 into the match field on an indiviudal, that becomes an override, so the system wont cap properly. basically, you are telling the system that is what the company did , end discussion.

again, based on what you indicated, I would say the person is not entitled to the $1,000. that should be forfeited (along with gains associated with it)

[Guest 401knewbie]

Thanks!

I ran a tiered match and let the system calc it.

So I'll call the vendor.