ADP testing was incorrect

[Guest Boilerburm1]

What are any thoughts about a plan sponsor's obligation to re-run ADP tests if they find out that they were done incorrectly?

Situation: Employer A and Employer B (members of a controlled group) both adopt Plan X. ADP test was performed separately for each Employer. Both tests pass.

Do we need to go back to perform the tests together?

What if this has been going on for 4 years?

What if this has been going on for 10 years?

Do we have to go all the way back? Is there a statute of limitations?

Thanks for any feedback.

[austin3515]

I think the audit period is generally 3 years. You should at least go back three years.

[RCK]

I'm not sure why it matters.

If they pass separately, won't they automatically pass together? Intuitively, seems like basic arithmetic.

[Tom Poje]

RCK - not true

suppose you had plan 1

1 HCE 6%

1 NHCE 4%

plan 2

1 HCE 2%

10 NHCE 1%

both pass separately.

now try combining them

HCE will be 4%

NHCE will be 1.27% (4 + 1 + 1.....)/11

combining them will fail.

reason: it is not basic arithmatic because their is 'weighting' involved, depending on how many ees are involved in each group.

nice try, though!

[RCK]

I am so embarassed that I did not think it through.

Just goes to prove that you do get what you pay for.

[Tom Poje]

gotta miss something once and awhile

like, some baseball owners think if you 'but' the best players and have the biggest payroll then you should have the best record.