Prior Year ADP test and QSLOB

[buckaroo]

Client has had a plan for years. For the 2008 plan year, they have informed us that a portion of the population should be treated as a QSLOB and tested separately. The ADP tests utilize the prior year testing method. What prior year percentage should be used for QSLOB? NON QSLOB? I would think of two possible scenarios: The first is to use the prior year ADP as calculated for the combined group. The second would be to use the ADP as calculated for the combined group for the NONQSLOB and 3% for the QSLOB and treat as a new plan. I think the former is the correct way to go.

There was also the idea recalcing the prior year for both groups, but I cannot find justification for that so I chose to exclude that idea.

Any thoughts would be appreciated. Also, any cite or references would be greatly appreciated.

[Kevin C]

Have you looked at 1.401(k)-2©(4)?