Missed Safe Harbor and ADP testing

[BG5150]

Where can I find a write-up on when a SH contribution is missed, when are we required to do the ADP test?  Is it in the EOB?

I have a plan where, for whatever reason, the ER did not deposit a SH for two people.  They did it for the other dozen or so participants.  Do I have to do an ADP test for 2014 and 2015?  And still have the ER make the SH contribution.

What if it was for an entire population for a year?  What if it's just a true-up that was missed for the plan/a few participants?

I don't think I've ever sat down and read an clear, concise procedure for

[RatherBeGolfing]

(2017 online edition) EOB Ch 11 Section XIV Part B Item 7 (timing of Safe harbor contributions)

Quote

7.c. Consequences of failing to make a timely contribution. Since the requirement to make the safe harbor contribution must be set forth in the plan, a failure to make a timely contribution would be an operational failure (i.e., a failure to follow the terms of the plan). Accordingly, the primary correction method would be to place the participants in the same position as they would be in had the deposit been made timely (i.e., deposit lost earnings on the late contribution). The EPCRS procedures would apply here, and in many cases the self-correction procedures under SCP would be available. For details on EPCRS, see Section VI, Part B, of Chapter 15. By making appropriate EPCRS correction, the plan’s safe harbor status would be protected. The late contribution would not require the plan to default back to ADP/ACP testing.

 

[John Feldt ERPA CPC QPA]

Thus, no ADP test. If you follow the language in the document for a plan that is written as safe harbor, you essentially only find that the ADP test applies if the plan specifically follows the rules for exiting safe harbor.

[BG5150]

So when DO you have to do the ADP test in an ostensibly safe harbor plan?

[K2retire]

It's my understanding that you only have to do an ADP test in a year in which they amend the plan to remove the safe harbor provisions.

[Tom Poje]

in other words, if the plan is safe harbor and the contributions aren't made, there is still no testing.

however, since the document wasn't filed then I suppose  possible plan disqualification, or participants complaining to the DOL they didn't receive what they should have, but thank heavens, no ADP test to worry about

[RatherBeGolfing]

55 minutes ago, Tom Poje said:

in other words, if the plan is safe harbor and the contributions aren't made, there is still no testing.

however, since the document wasn't filed then I suppose  possible plan disqualification, or participants complaining to the DOL they didn't receive what they should have, but thank heavens, no ADP test to worry about

Well the participants would be made whole, just not on time...  

But what if the SH is never made (Employer out of business)?  ADP test doesn't matter since all assets become subject to taxation at plan disqualification?

[Tom Poje]

oops, my typo. of course I meant document not followed (not filed) must be all this testing and dealing.

 

the DOL says deferrals have to get in as soon as possible, the assets house says to process return of deferrals you have to tell at the minimum of a week before hand. go and figure.

 

rather be golfing: I think in the case of er going out of business there is some sort of pecking order in bankruptcy court. but at that point, I think the least of concerns is a failed ADP test, since pretty much all assets are going to be distributed one way or another. The regs do say if you stop or reduce, you are suppose to give notice and then run the test, but then you are probably talking about a situation in which notice wasn't even given...

[RatherBeGolfing]

9 minutes ago, Tom Poje said:

rather be golfing: I think in the case of er going out of business there is some sort of pecking order in bankruptcy court. but at that point, I think the least of concerns is a failed ADP test, since pretty much all assets are going to be distributed one way or another. 

I agree with all the above.  I was just thinking out loud whether the HCEs who deferred the maximum ($18-24k) would still get the benefit of being able to distribute those deferrals as a rollover rather than refunded for a failed ADP test.  This is of course assuming that the IRS does not disqualify the plan making refunds/rollovers a moot point.