Failed ADP

[thepensionmaven]

Client has 401k/ profit sharing plan, non safe harbor.

ADP test failed for 2016.

Can  profit sharing contribution, as long as 100% vested, be used to satisfy ADP?

And the balance of any profit sharing contribution be allocated as a profit sharing contribution for the year

[Mike Preston]

Does the plan have a provision for QNEC's?

[ETA Consulting LLC]

Keep in mind that the portion of a profit sharing allocation that is allocated as a QNEC cannot be pull double duty in the same manner as a Safe Harbor Non-elective with respect to testing the profit sharing allocation.  Plus, (as Mike implied), merely being 100% vested doesn't cut it.  The Profit Sharing would actually have to be a QNEC (meaning it would need to come with the withdrawal restrictions in addition to the vesting requirements). 

So, if NHCEs get a 3% QNEC (that is used in the ADP test) plus a 2% regular allocation while the HCEs get a 5% allocation; then you're running the 401(a)(4) test on the profit sharing formula with the NHCEs at 2% and the HCEs at 5%.

I'm merely trying to illustrate a point and not sure if I used the appropriate semantics, but hopefully you get my point.

Good Luck!

[Mike Preston]

I get the point, but numbers matter.  In the case you posit, a 2% NHCE contribution would satisfy gateway and could, very well, satisfy 401(a)(4).  But your point is well taken.

[thepensionmaven]

I found this cite from a few years ago.

Thanks

.https://benefitslink.com/boards/index.php?/topic/23467-qnec-profit-sharing-contributions/