John A Posted January 21, 2000 Posted January 21, 2000 Ineligible employees were allowed to make salary deferral contributions and received matching contributions. The amounts have been returned or forfeited under APRSC. Do the contributions have to be included in the ADP and ACP tests?
Guest KB Posted January 21, 2000 Posted January 21, 2000 Only employees who are eligible to make salary deferrals (or are eligible to receive a QNEC or QMAC) can be included in the ADP test. Likewise, only employees who are eligible to receive a company matching contribution or make after-tax contributions can be included in the ACP test.
John A Posted January 21, 2000 Author Posted January 21, 2000 KB, Thanks for the response. Does that apply to both HCEs and NHCEs? Also, on what do you base your opinion (formal written guidance, informal guidance at a conference, etc.)? Thanks again.
Guest KB Posted January 25, 2000 Posted January 25, 2000 See Rev Proc 99-31, section 3. Basically states that any correction for an operational error cannot create a qualification failure. If the ADP/ACP test is not satisfied, you have a qualification error in your 401k plan. Therefore, if you refunded (or forfeited) dollars since running your ADP/ACP test, you should consider verifying that your test still passes. Yes, this would (as far as I'm aware of) apply to both HCEs and NHCEs.
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