Use of elective deferrals and/or QNEC in the ACP Test

[Lori H]

an Adoption Agreement states "In computing the ACP, the employer shall take into account and include as Contribution Percentage Amounts: option 1) Elective Deferrals and/or 2) QNEC's

under the plan or any other plan of the employer."

I thought elective deferrals/QNECs applied to ADP and employer match/QMACs applied to ACP?

Is my thinking wrong?

[J Simmons]

Generally speaking, how you've understood it is how many plans provide explicitly. However, a plan can alter to which of the tests, ADP or ACP, certain amounts will be applied.

[Lori H]

Generally speaking, how you've understood it is how many plans provide explicitly. However, a plan can alter to which of the tests, ADP or ACP, certain amounts will be applied.

So, you could use QNEC's to satisfy the ACP and QMAC's to satisfy the ADP. I guess since the employer funds both they are one in the same?

[J Simmons]

Generally speaking, how you've understood it is how many plans provide explicitly. However, a plan can alter to which of the tests, ADP or ACP, certain amounts will be applied.

So, you could use QNEC's to satisfy the ACP and QMAC's to satisfy the ADP. I guess since the employer funds both they are one in the same?

To the extent the plan document permits and the QNECs are not used to satisfy the ADP, you could use them to satisfy the ACP. Likewise, to the extent the plan document permits and the QMACs are not used to satisfy the ADC, you could use them to satisfy the ADP.