Trailing earnings and ADP/ACP tests

[Guest Quacka]

Calendar year 401k plan uses prior year testing method for ADP/ACP. Some employees terminate in late December and are paid the following January, with elective deferrals coming out of the last paycheck (I think these are matched as well).

Sponsor would like to exclude such contributions from ADP/ACP tests.

Here is language from definition of "includable compensation" in the prototype document:

To be included in determining an Active Participant's "deferral ratio" for a Plan Year, "includable contributions" must be allocated to the Participant's Account as of a date within such Plan Year and made before the last day of the 12-month period immediately following the Plan Year to which the "includable contributions" relate. If an Employer has elected the prior year testing method described in Subsection 1.06(a)(2) of the Adoption Agreement, "includable contributions" that are taken into account for purposes of determining the "deferral ratios" of Non-Highly Compensated Employees for the prior year relate to such prior year. Therefore, such "includable contributions" must be made before the last day of the Plan Year being tested.

Are there any permissible methods to exclude these contributions from ADP/ACP?

Thanks for your help.

[Tom Poje]

this is document driven and should show up in the Post EGTRRA document.

for example

I believe that is covered in an accudraft document checklist by the following:

Does code sction 415©(3) compensation include amounts earned during the limiation year but not paid until the next limitation year?

As I recall, Corbell documents have similar language. can't speak for any others.