Reclassify Deferrals as Catchup to Correct ADP Failure

Question regarding and ADP Test Failure.  We have a failed ADP Test for a client with 4 HCE:

2 HCE are under 50, and not eligible for a Catchup
1 HCE maxed out his contributions ($27k), so therefore we are already ignoring the $6,500 catchup in the ADP Testing
1 HCE, who is over 50, contributed $13,000 for 2022

Can we "re-classify" $6,500 of the HCEs 401(k) to a catchup, thus excluded them from the test?

If we test this HCE with $6,500, we will pass the testing so I just wanted to confirm. 

Thanks in advance!

No, you can't pre-emptively reclassify as catch-up to improve your testing results. You perform the test as normal, and then the amount that would have otherwise been distributed as a refund gets reclassified as catch-up.

If there were another reason that the deferrals could be reclassified as catch-up, such as exceeding the 415(c) limit when combined with a profit sharing contribution, then you would exclude those deferrals from the ADP test.

2 minutes ago, C. B. Zeller said:

No, you can't pre-emptively reclassify as catch-up to improve your testing results. You perform the test as normal, and then the amount that would have otherwise been distributed as a refund gets reclassified as catch-up.

Got it, more of what I thought.  Just to confirm, because I know the client is going to ask, the return has to be done for all of the HCE evenly?  They can't put the correction just on the 1 employee

Correct.

Refunds have to use the method described in the regulations.

The amount to be refunded is based on the percentages needed to pass the test.  The refunds will be made first from the HCEs with the largest amount of deferrals until such time as all of the amounts to be refunded is paid out.

Bottom line, the HCE who maxed out at the deferral is going to have a refund even if all of the amount of the refund is due to the other HCEs.