Using the otherwise excludable disaggregation method for ADP testing for the 2014 plan year

[30Rock]

If running ADP and ACP test after the 12 month period - testing is being done now for the 2014 plan year, can the disaggregation method for otherwise excludable employees still be used?

Thanks!

[BG5150]

I think you can use it, but only for a passing result.

[SST73]

I'm assuming the test is failing on total population, prior to disaggregating OEEs. EPCRS prescribes two correction methods - QNEC and "one-to-one" - and I don't believe either method allows for the plan to disaggregate OEEs.

[Kevin C]

From The ADP/ACP failure correction method in Rev. Proc. 2013-12, Appendix A .03:

... Under this correction method, a plan may not be treated as two separate plans, one covering otherwise excludable employees and the other covering all other employees (as permitted in § 1.410(b)-6(b)(3)), in order to reduce the number of employees eligible to receive QNECs. Likewise, under this correction method, the plan may not be restructured into component plans in order to reduce the number of employees eligible to receive QNECs.

[30Rock]

I think the issue at hand is whether we can use disaggregation in order to Pass ADP and ACP. If we can use it, then the plan passes nondiscrimination. So QNEC's and one to one correction are not relevant.

Thoughts?

[Tom Poje]

there are options when testing (e.g. otherwise excludables, comp less deferrals, etc)

I don't believe it matters 'when' you actually run the test, they are still permitted. at least I don't recall anything in the regs that says these optional testing methods are only permitted if you run the test within a year, after that you van only test all at once and use total comp.

If the plan fails and it is over a year then EPCRS kicks in and restrictions on how to fix things kicks in (as pointed out, no otherwise excludable)

[BG5150]

It doesn't matter when you actually RUN the test. You still have all the available methods to get the ADP and/or ACP tests to pass.

When none of those methods produce a passing result, you must correct the test somehow. Within one year, you have your standard corrections. After one year, you look to EPCRS, and there you find you cannot disaggregate to calculate your refunds/QNEC amounts.

[BG5150]

Wow, Tom and I posted eerily similar posts moments apart...

[Tom Poje]

only because I sat behind BG5150 in class and I copied his answer, but since I used a faster website my answer appeared before his did. Hopefully the teacher doesn't read this.

[BG5150]

I am humbled that ToPo cribbed his answer from mine...