20 Feb 2024
Testing-Testing 1, 2, 3: ADP/ACP Testing is Still a Thing!
All qualified plans, including 401(k) plans, must comply with the nondiscrimination standards of the Internal Revenue Code which prohibit discrimination, in benefits or contributions, in favor of highly compensated employees. 401(k) plans have a special nondiscrimination test, prohibiting the highly compensated group from getting (or making) greater contributions (usually by percentages) in elective contributions, matching contributions, and qualified non-elective contributions. Review this practice note to understand the annual plan year test along with the impact of a safe harbor. Happy testing!
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