Question #53 06/98

[Guest Jhagan]

What is the ADP for the HC gropu for 12/31/97?

-ER makes a QNEX totalling 3% of eligible comp to all eligible ee's including HCE, to satisfy the top-heavy minimum required contribution.

-ER Makes no other nonelective contributions

-Plan does not allow employee after-tax contributions

-Gross comp is used for testing

-All NHCE are nonkey

Part, deferrals, Comp

A, 9500, 200000

B, 0, 130000

C, 4000, 80000

Answer is 6.65 Help

[Alan Simpson]

The answer is as follows:

Participant A:

Deferral of $9,500, QNEC of $4,800 (eligible comp of $160,000 * 3%) give an ADP of 8.9375%

Participant B:

Deferral of $0, QNEC of $3,900 (eligible comp of $130,000 * 3%) gives and ADP of 3.000%

Participant C:

Deferal of $4,000, QNEC of $2,400 (eligible comp of $80,000 * 3%) gives and ADP of 8.0000%

SUM of HCE ADP percentages (8.9375 + 3.0000 + 8.0000)= 19.9375%. Divide this by the number of HCE's (3) and the answer is 6.6458% rounded to 6.65%