What does ADP stand for?

Specifically, a QACA is deemed to satisfy the actual deferral percentage (ADP) and actual contribution percentage (ACP) nondiscrimination tests under a design-based 401(k) safe harbor.

A 401(k) with a profit sharing contribution allows the profit sharing contribution to be used for cross-testing, and the plan sponsor can make a qualified non-elective contribution (QNEC) by vesting part or all of the profit sharing contributions if the plan fails actual deferral percentage (ADP) testing.

These tests are referred to as the actual deferral percentage (ADP) test and the actual contribution percentage (ACP) test (as described in Sec.

The first discrimination test, the "ADP test," is satisfied if the actual deferral percentage (ADP) for HCEs for a plan year is equal to or less than either: 1) 125 percent of the ADP of all non-HCEs eligible to defer under the arrangement; or 2) the lesser of 200 percent of the ADP of all eligible non-HCEs or such ADP plus two percentage points.

Compliance information is updated as soon as it becomes available, including status of actual deferral percentage, actual contribution percentage and pass/fail testing.

Performing the actual deferral percentage (ADP) test under Sec.

Second, if an EACA plan fails the actual deferral percentage (ADP) test or the actual contribution percentage (ACP) test under Sections 401(k) and 401(m) of the tax code, an EACA plan can make corrective distributions up to six months after the end of the plan year, rather than the customary two and a half months after the end of the plan year, without incurring the 10 percent employer excise tax.

401(k) plan uses the current-year testing method for actual deferral percentage (ADP) and actual contribution percentage (ACP) testing, it may be incorporated into a safe-harbor plan as late as 30 days before the end of the plan year.