Match Coverage Failure and ADP/ACP Testing

Matching contributions fail coverage due to allocation conditions. 

1.  To correct, we have to provide QNEC to some NHCEs at the ACP rate.  Can these QNECs be used in the ADP tests?  Can they be used in the ACP test  I believe the answer is yes to both

2.  Or do we run the ADP/ACP tests first, then make QNEC to correct ACP failure which will correct the match coverage failure?

I think # 1 is the correct methodology, but looking for other opinions.  Thanks.

If it's allocation conditions as the cause of the failure, why isn't the "coverage fix" then just to expand the actual match contribution for these folks, as opposed to allocating a QNEC?

And then you'd calculate your refunds based on this expanded ACP test with those folks (terms/under 1000 hours?) brought back in

3 hours ago, Bri said:

If it's allocation conditions as the cause of the failure, why isn't the "coverage fix" then just to expand the actual match contribution for these folks, as opposed to allocating a QNEC?

And then you'd calculate your refunds based on this expanded ACP test with those folks (terms/under 1000 hours?) brought back in

If the Plan has elected the 410(b) failsafe then I would agree with you. 

Otherwise, if you're correcting under 11(g), I think the Coverage and the ACP test occur simultaneously, with any failure correction handled independently.  Just because you've made a QNEC allocation doesn't mean it counts in the ADP test, unless it's a QNEC made for the purpose of satisfying the ADP.  A quarter is a coin, but not all coins are quarters.

The solution to the coverage issue is going to require increasing the count of NHCEs benefiting from the match.  What happens next can depend on some additional details and take different paths forward.  For example, is the plan (hopefully) using current year or (hopefully not) using prior year testing?  Did the plan pass the ADP test and the ACP can benefit from borrowing?  Will disaggregation help?  Will a QMAC help?

If you're taking the 11(g) route, work out the coverage solution and the ACP end game beforehand.

I haven't heard of running your ACP test if the underlying match component hasn't passed 410b yet.

In this case, for the 11(g) amendment we get to decide who will be allowed to get covered and be considered benefiting for coverage.  We know each individual's service history and compensation, and the consequences if we extend coverage to include each of them.  We then expand the existing ACP test population to model the inclusion of a prospective selection of individuals for coverage on the ACP test.  Using this population, we model ACP testing strategies to optimize the outcome.  (Depending on the plan sponsor, optimizing may be purely cost or may include some consideration on who gets included and who does not.)  Once we have modeled a desired result, write and adopt the 11(g) amendment.  The amendment is predetermined to result in passing coverage and curing the ACP. 

Short version, when we can control all of the variables, we can predict the outcome. 

If you try this with canned testing software, it can be terribly inefficient.  Excel can be used to build the model then use its data management features and what-if analytical capabilities to find a solution.

The 11(g) Amendment is only available if the plan does not have fail safe language for the coverage.