Prior year testing for the '99 year.

[pbarrett]

We have a 401(k) plan that was established back in '95. We have always tested on a current year basis. This year is the first year they have failed the adp testing (no match is made). I have heard it is possible to use prior year numbers for testing the '99 and then it is still ok to flip back to current year for the 2000 year if we so desire. Is that true?

Thank you.

[LCARUSI]

Assuming:

1)It's a calendar year plan year, AND

2)Plan document allows it

Yes, you can use prior year method for 1999 and current year for 2000. But there are some unfavorable issues if you used QNECs or QMACS to pass using current method in 1998. Use of current year method in 2000 would prohibit reverting back to prior year in 2001.