Form 5500 #14 - IRS Compliance Questions

Hello - I have a client with a deferral-only 401k plan.  Per the plan document, HCEs are excluded from participating.  On Question #14, would this be considered a "designed-based safe harbor method", "current-year ADP test", or "N/A"? 

The plan is designed to automatically pass ADP testing, but my notes from a CPE class indicate "design-based safe harbor method" is used for real safe-harbor (match and nonelective)  plans and not for a plan that is designed via the plan document to pass the ADP test.  

Thank you for your thoughts.

From the instructions for this line:

Quote

Check “Design-based safe harbor method” if this is a safe harbor 401(k) plan, that is, a SIMPLE 401(k) plan under Code section 401(k)(11), a safe harbor 401(k) plan under Code section 401(k)(12), or a qualified automatic contribution arrangement under Code section 401(k)(13). If the plan, by its terms, does not satisfy the safe harbor method, it generally must satisfy the regular nondiscrimination test, known as the actual deferral percentage (ADP) test. Check the appropriate box to indicate if the plan uses the “current year” ADP test or the “prior year” ADP test. Check “current year” ADP test if the plan uses the current year testing method under which the ADP test is performed by comparing the current plan year’s ADP for highly compensated employees (HCEs) with the current plan year’s (rather than the prior plan year’s) ADP for nonhighly compensated employees (NHCEs). Check all boxes that apply for a plan that tests different groups of employees on a disaggregated basis. Check “N/A” if the plan is not required to test for nondiscrimination under Code section 401(k)(3), such as a plan in which no HCE is benefiting.

The highlighted portion seems to describe your plan, so it might make sense to check "N/A" as described.

9 minutes ago, C. B. Zeller said:

The highlighted portion seems to describe your plan, so it might make sense to check "N/A" as described.

Agreed.

Thank you - that makes sense and although I have read those instructions more times than I care to admit, I did not notice that last line.