ADP ACP testing and comp used in test

[John Feldt ERPA CPC QPA]

ADP/ACP tested plan. Allocations in the plan use full year pay, it does not exclude pay prior to entry.

Testing comp says to use any definition that satisfied 414(s) and it's regulations.

Does 414(s) allow exclusion of pay prior to date of entry (could we test using comp excluding pay before the entry date)?

[PensionPro]

Yes. Our Corbel VS doc states under the definition of 414(s) compenstion that "an employer may further limit the period taken into account to that part of the Plan Year or calendar year in which an Employee was a Participant in the component of the Plan being tested."

[John Feldt ERPA CPC QPA]

I don't exactly see that language in this plan's document. It has text stating "The employer's election in its adoption agreement relating to pre-entry compensation is nondiscriminatory."

But I see no general statement in this document saying the pre-entry compensation can be operationally elected for 414(s) purposes; and I have not found that option listed in 414(s) or 1.414(s).

Since the document allows the election in the adoption agreement, does it stand to reason that it could also be operationally elected for testing purposes?

[BG5150]

3.b.5)Employee who is an eligible participant for only part of year. The nondiscrimination testing rules permit the compensation of an employee to be measured for just that part of the plan year that he is an eligible employee. See the definition of plan year compensation in Treas. Reg. §1.401(a)(4)-12, and the definition of compensation in Treas. Reg. §1.401(k)-1(g)(2) (August 8, 1991, as amended December 22, 1994) and Treas. Reg. §1.401(k)-6 (December 29, 2004). Footnote Presumably, then, to demonstrate whether a modified definition of compensation satisfies IRC §414(s), the compensation ratio of an employee described in this paragraph may be determined by dividing compensation for the portion of the year that the employee is eligible by the total compensation for the same portion of the year.

You can exclude pre-participation compensation when testing. (from 2008 ERISA Outline Book