ACP TESTING

[Guest Dennis]

I have a question on how to proceed with an ACP test as to provide the best results possible. The plan has an immediate eligibility for both 401(k) and after-tax contributions. The plan provides for a matching contribution after 1 year of service, monthly entry dates. The compensation being used for testing purposes is eligible compensation, which is entire year due to immediate eligibility of after-tax contributions. Therefore, the ACP results are lowered for individuals eligible for match later in the year due to using entire year compensation.

The question - Can both contributions be tested seperately (using different compensation figures) and then weight the two individual tests together for a final ACP result?

Thanks for any input!!!!!!!!!!!

[MWeddell]

Sorry to wreck an innovative idea, but I don't think it's permitted. All 401(m) arrangements within a plan must be aggregated under one 401(m) test.

[Guest EDSAADE]

As an alternative, you can disaggregate your plan into two plans for testing purposes. (1) Participants that meet the statutory eligibility requirements and (2) participants that participate prior to meeting the statutory eligibility requirements. (Treasury Regulation 1.410(B)-(6)(3),1.410(B)-(7)©(3)and 1.401(a)(4)-(12))

This usually produces better results since most "short service" employees do not defer and in most cases there are no highly compensated employees in this group.

Good luck!!

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