ACP test questions

[Guest saddiew]

I recently received a letter regarding the forfeitures of contributions to my 401k due to failing the annual contribution percentage (ACP) test for 2008. This is my first time experiencing this situation and I have the following questions:

1)Does the ACP test that is performed take into account any contributions that I make (i.e. pre-tax & 401k roth post-tax)?

2)Regarding #1, according to what I found on the internet, it includes employer matching and employee after-tax contributions. Does the 401k Roth option fall into the employee after-tax category and is therefore included in the ACP test?

3)If the 401k Roth option that is offered by my company is included in the ACP test, would changing my contribution percentage to pre-tax deductions possibly eliminate this problem in 2009 and beyond?

4)Is my company required to pay out the forfeited money back to me?

A)Is this tax free money or pre tax money?

Thanks in advance!!

[K2retire]

The ACP test does not include Roth contributions. Those would go in the ADP test just like pre-tax deferrals do.

The vested portion of the employer match should be paid to you. If you are not fully vested, the non-vested portion will be forfeited. Anything paid to you is fully taxable.

It is somewhat unusual (although not impossible) that you would receive an ACP refund without also receiving an ADP refund of part of your deferrals. Whether that part of the refund is taxable or not will depend on whether it was a pre-tax deferral or a Roth deferral.