2008 ADP Test

[Earl]

Everyone is hired after 8/1/06 so they are otherwise excludible for 2007 ADP testing.

Plan has immediate eligibility/entry.

For 2008, to use prior year testing, do I have to run 2007 ADP test with everyone in the test? Is there anyway to exclude any of the employees but not all? (I don't think so.) I think otherwise excludible testing is "use statutory rules" as only option.

2008 would be first year of testing but not first year of plan.

Bunch of new employees started in November and did not defer, so current 2007 year average is very low.

So I have a 0% first year average for 2008 or I have to use 2007 actual and go current year testing for 2008, 2009, 2010 & 2011.

2012 I could switch to prior year.

So, I guess question is, am I forced to use current year testing? Any techniques here to consider?

thanks

[Tom Poje]

In this case my friend

You have nothing to fear

One thing is certain

And the regs make it clear

With no NHCEs

involved in the test

The HCEs pass

Its simply the best

If its doubt in your mind

that you have nothing to do

just check out the regs

1.401(k)-2(a)(B)(ii)

[JanetM]

You are quite chipper this morning Tom. Nice answer.

[Earl]

I understand that 2007 is a pass (actually a "no test"), so no problem.

But for 2008 I have NHCEs eligible under the OE provisions. But the prior year number for the HCE limit for 2008? 0%?

A Looks like I have to use current year testing for 2008, or

B Use prior year testing run using immediate entry (plan provision) because OE yields a 0% for the NHCEs.

Agree?

Thanks

[Tom Poje]

one of the provision under the regs is that otherwise excludable option applies only to NHCEs.

if you test that way, then it sounds like you have the following:

statutory includable - only HCEs, no NHCEs to compare so you pass

otherwise excludable - only NHCE - so you pass because there are no HCEs.