ADP Test and Refunds

Plan has 3 HCEs (2 contribute) and 12 NCHEs. Doctor/owner has until his tax filing deadline to contribute.  Last year I gave him 11000 and 6000 was categorized as catch up. Test passed.  This year I gave him 8850 and the test passes, the 11000 wouldn't work (change in demographics); however, it show a refund to HCE #2 in the amount of $550 (no SBJPA/Allocable Income/total Refund Amount)-- this in Relius. Then it shows the $550 as catch up to the doctor.  Does that make sense? 

Thank you in advance. 

Yes, it makes sense. When you reclassify deferrals as catch-up due to the ADP test, the only amount that gets reclassified is the amount that would otherwise be refunded. So it makes sense that the amount reclassified for the one HCE is equal to the amount of the refund for the other HCE, earnings aside.

Correct. It's not the same $550. It's just the one is eligible for catch up and the other isn't.

6 hours ago, ratherbereading said:

Plan has 3 HCEs (2 contribute) and 12 NCHEs. Doctor/owner has until his tax filing deadline to contribute.  Last year I gave him 11000 and 6000 was categorized as catch up. Test passed.  This year I gave him 8850 and the test passes, the 11000 wouldn't work (change in demographics); however, it show a refund to HCE #2 in the amount of $550 (no SBJPA/Allocable Income/total Refund Amount)-- this in Relius. Then it shows the $550 as catch up to the doctor.  Does that make sense? 

Thank you in advance. 

What does you "gave him" mean? Should be non discretionary as far as you are concerned. Something doesn't sound right. 

28 minutes ago, Mike Preston said:

What does you "gave him" mean? Should be non discretionary as far as you are concerned. Something doesn't sound right. 

I almost mentioned this in my earlier reply. I'm going on the assumption that the doctor asked ratherbereading to run a projected ADP test in late 2020 to see what was the maximum he could defer without failing the ADP test. Because we all know that an owner with earned income has to make their deferral election before the end of the year, even though they have until their taxes are finalized to make the deposit, right?

1 hour ago, Mike Preston said:

What does you "gave him" mean? Should be non discretionary as far as you are concerned. Something doesn't sound right. 

It means I told the client the doctor could contribute 11000 and still pass testing. 

1 hour ago, C. B. Zeller said:

I almost mentioned this in my earlier reply. I'm going on the assumption that the doctor asked ratherbereading to run a projected ADP test in late 2020 to see what was the maximum he could defer without failing the ADP test. Because we all know that an owner with earned income has to make their deferral election before the end of the year, even though they have until their taxes are finalized to make the deposit, right?

No, he didn't ask for a projected test. He's a Schedule C sole proprietor. He never makes his contribution until close to the tax filing deadline. It's only an issue because for the past 2 years they didn't do their flex 3% safe harbor. 

Please re-read my comment.  You have a problem that needs fixing.