Failed ADP test in a plan's first year

[Guest fredk]

I know that if a plan fails the Top Heavy test in its first year of existence it will also fail the second years test as well due to the determination date being the same for both plan years. Does the same thing apply to a failed ADP test in a plans first year of existence? In other words if the plan fails ADP its first year does it automatically fail in its second year?

[ETA Consulting LLC]

No. It is merely a rule that the determination date for Top Heavy in the first plan year is the last day. Coincidentally, this is the same top heavy determination date for the following year. ADP tests deferrals during the year year, so each year would produce its own result.

Good Luck!