Disaggregated Plans Testing Method for ADP

[Vlad401k]

Hi,

 

I have a quick question about special testing rules for the ADP Test.

 

I understand that there are 2 ways to run the ADP Test for the Otherwise Excludable (OEX) Employees:

 

1) Early Participation Rule (where only OEX NHCEs are left out of the test)

2) Disaggregated Plans Testing Method (where all Non-OEX employees are tested together and all OEX employees are tested together)

 

In the ADP test, there are 4 HCEs, one of which is OEX. All HNCEs are non-OEX.

 

I believe he plan should be tested as follows:

 

1) Non-OEX HCEs tested together with Non-OEX NHCEs

2) 1 HCE OEX tested by himself because there are no OEX NHCEs - this portion of the plan should pass automatically because there are no OEX NHCEs

 

However, our testing software is testing all HCEs (even the 1 who is OEX) vs. NHCEs for the Otherwise Excludable test. I don't think that's correct as I think there should be a separate test for OEX employees because we're using the Disaggregated Plans Testing Method.

 

Do you agree?

[Bri]

That's right.  Your excludable HCE can either test against the excludable NHCEs (none, so auto-pass), or he gets thrown in with the non-excludable HCEs and tested against the non-excludable NHCEs.  (Which carves out the zero excludable NHCEs.)

 

Obviously you have to just find the override spot in your testing software. 

(Assuming you want the guy out of your "main" test, although that guy's rate will lead you to make the call on that one.)

[pmacduff]

Our Relius software offers three options for otherwise excludables when you run the ADP/ACP testing:

1. include in test; 2. test separately, 3. carve out NHCEs

Hopefully your system does as well.