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ADP Test Calculator401(k) Actual Deferral Percentage Test

What does this come to under the current IRS rules?

Maximum HCE ADP under the 1.25 times and the 2 times or 2 points tests, and the pass or fail result.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Maximum HCE ADP
6.20%
Limit under the 1.25 times test
5.25%
Limit under the 2 times or 2 points test
6.20%
Drawn to one scale
Maximum HCE ADP6.20%
Limit under the 1.25 times test5.25%
Limit under the 2 times or 2 points test6.20%
All results
MeasureResult
Maximum HCE ADP6.20%
ResultFails the ADP test
Limit under the 1.25 times test5.25%
Limit under the 2 times or 2 points test6.20%
HCE ADP above (+) or below (-) the maximum, points0.20
How this was worked out
Work shownrecomputed as you type
Test 1: HCE ADP not more than NHCE ADP x 1.25
Test 2: HCE ADP not more than NHCE ADP + 2 points and not more than NHCE ADP x 2
Pass if either test is met; ADPs are averages of individual deferral ratios to the nearest hundredth

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Test 1: HCE ADP not more than NHCE ADP x 1.25
  • Test 2: HCE ADP not more than NHCE ADP + 2 points and not more than NHCE ADP x 2
  • Pass if either test is met; ADPs are averages of individual deferral ratios to the nearest hundredth

How it works

Under 26 CFR 1.401(k)-2(a)(1), a cash or deferred arrangement passes the ADP test if the HCE ADP is not more than 1.25 times the NHCE ADP, or if it exceeds the NHCE ADP by not more than 2 percentage points and is not more than twice the NHCE ADP. If there are no eligible NHCEs, the arrangement is deemed to pass.

Each group's ADP is the average of the individual actual deferral ratios of its eligible employees, computed to the nearest hundredth of a percentage point. Under the prior year testing method the NHCE ADP comes from the preceding plan year; under the current year method both groups use the same year. Safe harbor plans are not tested.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Do eligible employees who did not defer count?

Yes. They are in the average with a deferral ratio of zero, which lowers their group's ADP.

Which year's NHCE ADP do I enter?

Under the prior year testing method, the NHCE ADP of the preceding plan year; under the current year testing method, the NHCE ADP of the year being tested. The HCE ADP is always the current plan year.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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