Hello,

I am struggling finding something that leads me in the right direction on this one.

Participant defers 10% of his $10,000 earnings from 1/1 - 6/30, into a 401(K) plan during the first 6 months of the plan year, and then takes a hardship and is suspended for the last 6 months of the plan year, but earns another $10K.

When performing ADP testing, Is only the $10K considered in determining his ADR, or is the full $20K used thus driving down his average to 5% for the year?

It would seem that you would not count the last $10K since he was not able to defer from it, but I cannot find anything that answers the question.

Thank you in advance for any insight you might have to offer.

Sincerely,

Andmik

You use the comp for the entire year. If you think it through, it is the same as including those who don't defer and adding their 0% to average. This guy effectively only contributed 5% for the year.

Just because he was not able to defer does exclude it from compensation.

Thank you JanetM, I appreciate your insight.