cpc0506 Posted February 24, 2012 Posted February 24, 2012 We have a client who had a SARSEP for the first half of 2011 and froze the plan per the IRS instruction as of June 30, 2011 and then established an 401k plan on July 1, 2011. Can anyone provide guidance on how testing is done? Is the DP Test for the SARSEP run for the period 1/1 to 6/30/11 and a separate ADP Test for the 401k plan? Or. do the plans have to be tested together and a single ADP Test run for the entire year? If anyone has some guidance on this issue, it would be appreciated.
ETA Consulting LLC Posted February 24, 2012 Posted February 24, 2012 You should treat each vehicle as if the other doesn't exist for testing purposes. Obviously, you don't want to exceed 402(g), but the ADP test for one is totally exclusive of the other. Keep in mind that when testing for the DPL under the SAR-SEP, each HCE is limited to 1.25 times the average of eligible NHCEs. This rules out any notion of combined testing with a 401(k); as the 401(k) averages both HCEs and NHCEs. Good Luck! CPC, QPA, QKA, TGPC, ERPA
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