Payroll by payroll Matching Contribution provision Amended to Stop mid year - ACP TEST

[AdKu]

One of the takeover plan I'm working on had payroll by payroll matching provision that was amended and eliminated mid-year.

Due to Failed ADP test, some HCEs' deferral will be refunded to them. There has to be matching contribution refund associated with the deferral that will be refunded, too.

Unfortunately, the matching contribution was booked as a transfer when we took it over from the other TPA. I was thinking of entering these matching contribution amounts into our software for testing purposes

My biggest challenge is that the plan allow immediate entry to the 401(k) portion of the plan and some employees deferred after the matching contribution was stopped by amendment mid-year.

How do I handle a situation like this?

Please share me your experience if you were in the similar situation I'm.

 

Many thanks.

[K2retire]

The client and their prior service providers will have to provide you with the information to do the proper calculations.

[AdKu]

Thank you K2retire,

I have the information necessary to perform the proper calculations.

However, I'm not 100% certain how to categorize plan participants for ACP test purposes:

1st- participants who were in the plan for matching contribution purposes before the elimination of the matching contribution but didn't defer at all

2nd. participants who were in the plan for matching contribution purposes before the elimination of the matching contribution but deferred after the elimination of the matching contribution

3rd- participants who entered the plan for matching contribution purposes after the elimination of the matching contribution and didn't defer at all

4th- participants who entered the plan for matching contribution purposes after the elimination of the matching contribution but deferred upon plan entry.

Which of the 4 category of participants should be taken into account when I run ACP test?

In other words, are any of the 4 category should be considered as benefiting with zero contribution that will ultimately affect the plan's ACP percentage?

I would appreciate any help

[Kevin C]

Does the plan also allow a discretionary match, or after-tax contributions?

[BG5150]

How do you know if match is to be refunded if you haven't run the ACP test yet?

Do you mean there was match associated with deferrals that had to be refunded?  Those are forfeited.

[AdKu]

Kevin C & BG5150 thank you,

The matching formula was a fixed match formula. 

The good news is that I performed the ADP/ACP test and there was no excess match contribution associated to the excess deferrals that needs to be forfeited.

Just to clarify may earlier question (I kind of find the answer now), who should have been in my ACP test.

It appears anyone who was eligible for any part of the plan year has to be in my ACP Test, please correct me if I am wrong.

Again,thank you very much for your help.

 

AdKu