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Calculating ADP 401(k) Fees Using Their 408(b)-2 Disclosure

"One of the largest small business 401(k) providers in the country is the payroll company ADP.... [This article will encourage a] 401(k) plan sponsor to total their ADP fees and evaluate them for 'reasonableness' -- an important 401(k) fiduciary responsibility.... Step #1 -- Confirm the ADP 408-b2 disclosure covers all of your 401(k) fees ... Step #2 -- Total ADP's direct fees ... Step #3 -- Total ADP's revenue sharing payments."

ADP/ACP Failure Corrections

"EPCRS requires ADP/ACP test failures corrections beyond the 12-month period to include not just a refund, but also to make an additional one-to-one QNEC in the same amount of the refunds.... To correct an ADP failure, the plan sponsor can elect to use the 'bottom-up leveling method.' Because the ADP test gives an equal weight to each person included in the test, a small QNEC contribution to a person who earned minimal wages due to short-term employment or termination early in the year has a much greater impact on the test results than the same contribution to a full year employee.... QNECs can become very expensive, and plans that continue to fail discrimination tests may need to look for an alternative plan design."

Court Dismisses Lawsuit by Plan Sponsor Participant Against ADP Multiple Employer Plan

"A plan sponsor participant in the ADP TotalSource Retirement Savings Plan, a multiple employer plan, has lost its effort to sue ADP, ADP TotalSource Group and the plan's administrative committee over allegedly excessive fees.... McCaffree [argued] that it has constitutional standing because it might be sued as a co-fiduciary for the defendants' alleged breach of fiduciary duties, and that it has statutory standing as a fiduciary.... [The district court judge] found that the plaintiff does not plead any facts suggesting that it could actually be held liable as a co-fiduciary. " [McCaffree Financial Corp. v. ADP, Inc., No. 20-5492 (D.N.J. Mar. 30, 2022)]

Second ADP ERISA MEP Lawsuit Includes a Dozen Counts

"Last week, McCaffree Financial Corp., a participating employer in the ADP TotalSource Retirement Savings Plan, filed an excessive fee lawsuit on behalf of the multiple employer plan and a class of similarly situated participating employers against ADP.... This week, a second lawsuit has emerged representing the interests of a proposed class of plan participants. The second suit largely mirrors the first in its allegations of prohibited transactions, excessive fees and other fiduciary breaches, but it is even more comprehensive and stretches beyond 150 pages." [McCaffree Financial Corp. v. ADP, No. 20-5492 (D.N.J. complaint filed May 4, 2020); Berkelhammer v. ADP TotalSource Group, Inc., No. 20-5696 (D.N.J. complaint filed May 7, 2020)]

Continuing Ed Material for IRS EP Personnel: Section 401(k) and(m) -- ADP/ACP Tests, Correction Methods under EPCRS (PDF)

59 pages, dated 2013. Excerpt: "At the end of this lesson, you should be able to: [1] Determine whether an employer correctly applied the ADP/ACP test. [2] Determine whether an employer timely corrected for an ADP/ACP test failure. [3] State the correction methods under Rev. Proc. 2008-50 when a plan does not timely correct for failing the ADP/ACP test. [4] Determine whether the employer made the correct Qualified Non-elective Contributions (QNECs)/Qualified Matching Contributions (QMACs) under Rev. Proc. 2008-50. [5] Determine whether the employer properly applied the one-to-one correction method. [6] Determine whether the employer properly coordinated multiple failures under a section 401(k) plan."

ADP Offers Health Care Cost and Payment Decision Support

Excerpt: ADP Inc, known for processing payrolls and providing related employer services, announced plans Tuesday to offer online decision-support tools straight to its clients' employees. ADP will team up with Subimo LLC to offer an online cost modeling tool. The tool will be integrated with ADP's ESS (employee self service) application to help employees evaluate health care plan costs based on individual medical needs.

When ADP/ACP Testing Fails, 401(k) Fiduciaries Should Understand Their Options

"Although approximately 30% of 401k plans subject to ADP/ACP testing fail, it's an outcome most small businesses want to avoid. [Here] are steps a 401k fiduciary can take to do that. [1] Become a safe harbor 401k plan ... [2] Increase non-HCE Participation ... [3] Evaluate your testing options."

ADP/ACP Safe Harbor Compensation Compliance Confusion (PDF)

16 pages. "ADP and ACP safe harbor plans require that a nondiscriminatory definition of compensation be used to determine safe harbor matching contributions. However, the plethora of permitted compensation definitions, and the rules surrounding them, can create compliance issues, particularly if the plan document, payroll, and record keeping are not properly coordinated."

ADP/ACP Safe Harbor Compensation Compliance Confusion (PDF)

16 pages. "While all these choices for safe harbor compensation may be a good thing, such abundance can lead to compliance issues in plan administration, particularly if the plan document, payroll, and record keeping are not properly coordinated.... This article considers safe harbor matching contributions and does not consider the use of ADP and ACP safe harbor nonelective contributions."

2015 ADP Annual Health Benefits Report

"Over the five-year period studied, the percentage of full-time employees (as designated by the employer) who were eligible for employer-provided health benefits rose by 2.0%. Despite a rise in eligibility, the number of eligible employees who opted to take insurance dropped by -1.7% during the same period, keeping the overall participation rate steady at 69.3%."