ACP test and Catch-up contributions

[Guest gbialikcpa]

I have a plan that normally passes ADP easily and fails ACP (after-tax, no match) by a small margin. We use borrowing or shifting to pass the ACP test. We are considering changing the plan in a way that we think will encourage more after tax contributions by HCE's. If the passing margin of the ADP test is not sufficient in the future to cover the ACP test through borrowing or shifting alone, can we recharacterize pre-tax contributions as catch-up contributions to pass both tests, even though the ADP test passes without it?

[Tom Poje]

my understanding is no.

catch-ups exist because of a plan limit, etc.

The ERISA Outline Book has a small blurb chapter 11 section IX part C

the plan may not apply the recharacterization rule first, and then determine how it wants to shift deferrals to produce different testing results