Davis Bacon and the 10% limit on disproportionate QNECs

[Jerry Erisa]

Based on my reading,

Qnecs may be included in the ADP test only to the extent they are not disproportionate within the meaning of Treas Reg 1.401(k)-2(a)(6)(iv).

QNECs under a Davis-Bacon feature are considered not to be disproportionate to the extent they do not exceed 10% of an NHCE's compensation.

A similar rule applies to QNECs that are included in the ACP test. See Treasury Reg 1.401(m)-2(a)(6)(v).

So, can the plan administrator use the excess, with an over 10% QNEC, to help pass the ACP test?

In other words, can (s)he use the first 10% of a QNEC to help pass the ADP test, and use the last 2% (12% QNEC -10% limit = 2%) to help pass the ACP Test?

Thank you in advance for any thoughts or suggestions for resources to consult!!

[Jerry Erisa]

it appears that our colleague in the industry, McKay Hochman, addressed the issue on his website, with a FAQ dated 3/24/15.

Thanks McKay/Hochman!