If an employee eligible to defer to a (k) plan is on the payroll but does not have any compensation in the testing year, does he/she count as a 0 for determining the ADP/ACP averages ?

I think the answer is yes, but could not find any definative guidance. The arguement against including this person is - If the EE had no compensation, he or she had no real opportunity to defer so he or she should not count as a 0 for determining the average.

Any thoughts ?

at different meetings the IRS agents have 'expressed' an opinion that such people should be treated as ineligble (or put another way, simply ignored) for purposes of testing, though there is no official guidance.

Here is a prior discussion:

http://benefitslink.com/boards/index.php?showtopic=23366&hl=

thanks all, seems the consensus is 0 comp. - no test. Works for me.