Harship suspension and testing compensation

[Guest andmik]

Hello,

I am struggling finding something that leads me in the right direction on this one.

Participant defers 10% of his $10,000 earnings from 1/1 - 6/30, into a 401(K) plan during the first 6 months of the plan year, and then takes a hardship and is suspended for the last 6 months of the plan year, but earns another $10K.

When performing ADP testing, Is only the $10K considered in determining his ADR, or is the full $20K used thus driving down his average to 5% for the year?

It would seem that you would not count the last $10K since he was not able to defer from it, but I cannot find anything that answers the question.

Thank you in advance for any insight you might have to offer.

Sincerely,

Andmik

[JanetM]

You use the comp for the entire year. If you think it through, it is the same as including those who don't defer and adding their 0% to average. This guy effectively only contributed 5% for the year.

Just because he was not able to defer does exclude it from compensation.

[Guest andmik]

Thank you JanetM, I appreciate your insight.