If you have a failed ADP test and refunds are being made to the HCE's and the corresponding match has to be forfeited due to the reduction in the deferrals, do you have to rerun the ACP test with the new lower match amounts? Thanks for your input

I would think only if you failed ACP the first time around...

If HCE's forfeit match, it can only get better...

Also, you know that if the HCE is partially vested, they actually should get the lost match directly to them.

I don't agree austin. Matching contributions associated with adp refunded amounts must be forfeited from the corresponding hce account. The acp test must then be rerun. If not corrected in this fashion, one or more hce's may be receiving a matching rate greater than any nhce which would cause the plan to fail the nondiscrimination of any BRF (i.e.- match rate) in the plan, as no nhce will be receiving this higher matching rate. No distributions to any hce's are to be done, as they are not entitled to those matching dollars.

Joanne already indicated she was reducing the match appropriately. My only point is why rerun the testing if the results could only improve.

Or were were you disagreeing with what I said about having the match paid to the HCE?

The pay out to the hce. I guess in order to maintain accurate records of the acp test, it should be rerun, so as to reflect the proper matching contributions.

In accounting, bookkeeping and actuarial assumptions, it is normal prudent practice to rerun (rebalance) your figures after you have made any significant changes.

In the case of testing where ratios and percentages etc come into play it would be prudent and advisable that you rerun your testing.

Although "the results could only improve" It is easier and much safer to rerun for accuracy than to later find out that it still failed.

Good to see you again, Mr. Burns...

to rerun or not to rerun that is the question...
why, I am not sure. guess it depends on why you want to rerun.

The new rules say you calculate the amount of refund based on percenatges, but determine the refund by who deferred the most $, not percentages. It makes absolutely no sense to rerun the test, because the plan could still end up 'failing'.
If the purpose is to merely have a hard copy showing that the HCEs match rate is not greater than the NHCEs, then fine.
I modified the report on the system I use (Relius) to show the results for the HCEs under both the old rules and new rules so I have the proof either way.


By the way, it is not necessarily true related match will be forfeited, especially in the case if the plan fails ACP testing as well. For instance, the particular document I am looking at clearly says "Matching contributions which relate to excess contributions shall be forfeited UNLESS the related matching contribution is distributed as an Excess Aggregate Contribution.

In searching for an answer to my dilema, I found this thread and would like to add:

I deduced from the the responses, match relating to a failed adp must be returned, however, what if the match is not being made monthly, rather calculated at the end of the plan year and funded in the following year Is the correct method to forfeit or reduce the deferrals to the amount less the refund, then calculate the match which does not create a forfeiture at all.

Linda Michals

lindamichals,

Generally you will make the full match per the formula & then take corrective action prescribed by the document.

Now again I say "Generally"; always check the document first. I suppose it could have some kind of screwy provision that will allow you do what you suggest. I can't imagine what it owuld be, but I'm not very creative.

an aside-tom, would you be willing to share your report? a relius user...

I have to verify if the report still works. I haven't run the report since upgrading to from 7 to 8.
maybe after I try running it I can post it.