Prevailing Wage ADP Failure - Fort Williams Software

[Purplemandinga]

A prevailing wage plan is failing ADP and pulls amounts classified as QNECs from the prevailing wage column to assist in the plan passing ADP. The problem is that there are some HCEs who received prevailing wage allocations, and while the QNECs did assist ADP, there were still failures for some HCEs. Some of these HCEs the system is showing need distributions are HCEs who didn't defer anything but only received prevailing wages. Do we distribute this as an ADP failure or is FTW getting it wrong and should only shift NHCEs?

If I can somehow force FTW to only shift NHCEs and not HCEs, wouldn't the plan have to pass general testing on amounts that didn't shift to ADP?

So basically I need to gauge the failure of each test by not shifting HCE QNECs and dealing with the general test vs shifting HCE QNECs and reviewing the failure in ADP?

 

[Purplemandinga]

Maybe to simplify my question, is it possible to correct ADP failures by distributing QNECs used in the ADP test absent available deferrals to distribute? I can't find anything that says I couldn't, only that I can't reclassify QNECs as catch up for correcting failures.

[BG5150]

I'd reach out to support @ftwilliam.com and ask them.  They'll know best what can be done and what cannot in the program.

[Purplemandinga]

Hey there BG,

They recommended I read the ERISA Outline Book or pay for their TAG research service to point me towards a solid answer... Treasury regulations appear to be silent on whether this can occur. That's why I poked my head on to here to see if anyone had encountered this scenario before either inside or outside of Fort Williams.

[Lou S.]

I don't think you can refund the Prevailing Wage contributions as they are not salary deferrals.

And I think you are correct that if you shift NHCE PWs to ADP and not HCE PWs you need to test the HCE PWs under the general test which if you don't have other employer contributions is problematic.  But I will say we don't work on any PW plans currently so I haven't run into this in practice.

I'm pretty sure you are allowed to run the ADP test without the PW contributions but that may result in larger refunds.

[Lou S.]

One thing I'm not sure of but if it is allowable may help. Shift just enough NHCE PWs to the ADP test to improve results but leave enough to pass the General Test with the HCE PWs.