401(k) testing and remediation

[Guest ojs000]

Since the change in how excess contributions are taxed (now taxed in year received) have any practitioners noticed a change in how many plan sponsors will not implement a cap on HCE contributions? Ie. Is it that big of a deal to fail ADP testing and receive a distribution? We are an employer using current year testing and limit HCE contributions to $10,000. I would prefer HCEs to maximize the amount they contribute and not be limited to an artificial cap. Other than paying the cost to print refund checks what is the drawaback of letting the plan fail and issuing refunds?

[rcline46]

No problem. We have many plans that routinely fail ADP testing and there is no problem with the HCEs getting returns each year, as long as they know it up front.