Used wrong ADP Testing Period

[52626]

Since 2004 the ADP Test has been run using Current Testing. However, the doucment stated Prior Year testing would be used.

Looking for some suggestions on how to correct. Do we use VCP and have an amendment to the plan stating current yaer was the testing method for all plan years after 12/31/2004? The plan is definately outside the SCP time period. We are trying to make the correction as painless as possible for the Plan Sponsor.

[ETA Consulting LLC]

That would work. If you have the tests, you can chart the numbers to ascertain if they would continue to pass using the prior year method. Remember, you are always running the "current year" for the NHCEs, even though you won't use the averages until the next year. So, the testing would have three averages: 1) Last Year NHCE Average, 2) Current Year NHCE Average, and 3) Current Year HCE Average.

You don't have an issue unless one of the tests have failed, but you would need to maintain the tests showing they passed using the prior year method.

Good Luck!