Bottom Up QNEC

[Guest tjt169]

If a plan fails both the ADP and ACP tests for their 2013 plan year and they are going to us the bottoms up QNEC method, can they give the lowest paid NHCE 5% to pass the ADP and then 5% to pass the ACP. The disproportionate rules apply to each test, correct?

Thanks for any insight!!!

[Kevin C]

The disproportionate rules do apply to both the ADP and ACP tests. The main question is does your plan document allow the allocation you want to do?

[austin3515]

But do they apply separately or in the aggregate? That is the question. I didn't feel like looking it up .

[Kevin C]

ADP and ACP are separate tests and under the regs, the 401(k) portion of the plan and the 401(m) portion of the plan are considered separate plans. The respective disproportionate allocation rules for each test apply it to contributions used in that test. I read that as applying them separately. But, before you get there, the answer to the first step in determining whether you can do this is "What does the Plan say?" If I had a nickle for every time I've heard that, I'd be retired.