RM 401 Chapter 5 Supplement.docx

# RM 401 Chapter 5 Supplement.docx - Chapter 5 Supplement I...

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Chapter 5 Supplement I. Steps for performing ADP & ACP Test A. Step 1: Determine who is eligible based on plan’s eligibility requirements. B. Step 2: Determine the Highly Compensated Employees. 1. 5% owner in the current or prior year 2. Employee who earned over \$120,000 in prior plan year 3. If employer elects, he can limit the HCEs to the top 20% of payroll C. Step 3: Determine the ADP for each participant by dividing their salary deferrals by compensation, rounding to 2 decimal places. D. Step 4: Perform Actual Deferral Percentage (ADP) test – Add the ADPs for the HCE group and divide by the number of HCEs to get the average. Do the same for the NHCE group. Apply the 1.25 and 2% test to see if it passes. E. Step 5: Calculate the matching contribution based on the plan formula. F. Step 6: Calculate the ACPs for each participant by dividing their matching contribution by their compensation. G. Step 7: Perform Actual Contribution Percentage (ACP) test – Add the ACPs for the HCE group and divide by the number of HCEs to get the average.

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• Spring '14
• RUTTER,MICHAEL
• Redox, Year Three, Deferral, Year Two

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