We have both 401K & 403B

[Guest AHECofaguy]

We recently established an ERISA 403B plan. We also have a 401-K plan. My question is this: Do contributions to the 403b by HCE need to be considered in 401K ADP/ACP testing? We have HCE's contributing to both plans, receiving a company match in the 401K up to the company limit for match and then contributing additional pretax contributions to the 403b to reach their annual limits of $16,500 plus $5,500 catch-up if eligible.

[Tom Poje]

my understanding, which could certainly be incorrect would be 'yes' based on the following:

Preamble:

Second, the final regulations define any other plan of the employer for this purpose to mean any plan or arrangement that is described in section 219(g)(5)(D), which includes a section 457(b) governmental plan and a section 403(b) plan, as well as a qualified plan.

§1.401(k)-1(a)(2)

(2) Rules applicable to cash or deferred arrangements generally--(i) Definition of cash or deferred arrangement. Except as provided in paragraphs (a)(2)(ii) and (iii) of this section, a cash or deferred arrangement is an arrangement under which an eligible employee may make a cash or deferred election with respect to contributions to, or accruals or other benefits under, a plan that is intended to satisfy the requirements of section 401(a) (including a contract that is intended to satisfy the requirements of section 403(a)).

§1.401(k)-2(a)(3)(ii)

(ii) ADR of HCEs eligible under more than one arrangement--(A) General rule.

Pursuant to section 401(k)(3)(A), the ADR of an HCE who is an eligible employee in more

than one cash or deferred arrangement of the same employer is calculated by treating all

contributions with respect to such HCE under any such arrangement as being made under

the cash or deferred arrangement being tested. Thus, the ADR for such an HCE is

calculated by accumulating all contributions under any cash or deferred arrangement

however you could not 'shift' such amounts to the ACP test.

§1.401(m)-2(a)6(ii)

(ii) Elective contributions taken into account under the ACP test. Elective contributions may be taken into account for the ACP test only if the cash or deferred arrangement under which the elective contributions are made is required to satisfy the ADP test in §1.401(k)-2(a)(1) and, then only to the extent that the cash or deferred arrangement would satisfy that test, including such elective contributions in the ADP for the plan year or applicable year. Thus, for example, elective deferrals made pursuant to a salary reduction agreement under an annuity described in section 403(b) are not permitted to be taken into account in an ACP test.