How to Understand Your Compliance Testing Summary Abbreviations and acronyms used in this summary: ACP Actual Contribution Percentage test ADP Actual Deferral Percentage test DOL Department of Labor HCE Highly Compensated Employee IRC Internal Revenue Code IRS Internal Revenue Service NHCE Non-Highly Compensated Employee You may see other documents posted with your Compliance Testing Results Summary. The documents you receive are based on your test results and when testing is completed. The chart below illustrates the documents and when they are included. If you have any questions not addressed in this guide, please contact your AUL plan services consultant. Name of Document Notice to Participant of 10% Federal Income Tax Withholding on Non-Periodic Distributions Not Eligible for Rollover IRS Form 5330 Return of Excise Taxes Related to Employee Benefit Plans Included? Included if ADP and/or ACP test fails, or if 415 Annual Additions Limit test fails and deferrals are returned. A copy of this notice must be distributed to all participants receiving a refund due to any of the situations indicated above. If all ADP and/or 415 refunds are recharacterized as catch-up contributions and there are no ACP refunds then it will not be included. Included if ADP and/or ACP test fails and testing is completed after the 2 ½ month deadline or 6 month deadline if your plan has an Eligible Automatic Contribution Arrangement (EACA). If all ADP refunds are recharacterized as catch-up contributions and there are no ACP refunds then it will not be included. Testing Method If your plan utilizes the prior year testing method, the 2014 Highly Compensated Employees (HCEs) Theoretical Maximum ADP and/or ACP percentages are provided to help you know in advance what your limit or maximum is for your HCEs for the 2015 plan year. If your plan utilizes the current year testing method, current year percentages may be an indicator of your limit or maximum for your HCEs if you do not anticipate significant changes in 2014. You can find the current year percentages on your actual test results. If your plan uses the current year testing method, you will not see prior year results.
Otherwise Excludable Testing We may have applied the special testing rules under IRC section 401(k)(3)(F) and/or 401(m)(5)(c) of the Small Business Job Protection Act of 1996 (SBJPA 96). If Otherwise Excludable Testing was used you will see a comment in the Important Information column of the summary. Otherwise excludable testing allows us to separately test those individuals (except HCEs) who are eligible for the plan only because your plan s requirements are more lenient than the statutory requirements of one year of service and age 21. This usually provides more favorable results; however, there are times when similar or less favorable results occur. We have used the most favorable results. Related Match Related match is the match associated with ineligible deferrals. If the ADP test fails and excess contributions are recharacterized as catch-up or refunded, any match that was made on those deferrals must be forfeited if catch-up contributions are not eligible for employer match. For example, if a matching formula was 50% of deferrals and $1,000 was recharacterized as a catch-up contribution or returned due to ADP failure, the related match is $500 and must be forfeited if catch-up contributions are not eligible for employer match. AUL will calculate related match amounts based solely on the participant elective deferral amount provided on the census, the matching contribution formula provided, the IRC section 402(g) deferral limit and the plan s catch-up provisions. In addition, we assume that matching contributions have an annual computation period and true-up contributions were made when Note: The original matching contribution allocations were not reviewed to determine if they were also based on the original deferrals, plan compensation and match formula provided, the IRC section 402(g) deferral limit, the plan s catch-up provisions or an annual contribution compensation period. Shifting To help a failing ACP test, it is permissible to shift a portion of the NHCE ADP and apply it to the NHCE ACP. The shifting method is allowed only if the plan passes the ADP test. If Shifting was used you will see a comment in the Important Information column of the summary. Testing Alerts Your Compliance Testing Results Summary may contain a section with Alerts. Below is a guide that illustrates possible alerts you may see and how you can review your data or plan document or adoption agreement to determine if further action on your part is required. In many instances, an alert is only additional information for you and no action is In some cases, you may determine that you may wish to submit revised data for a retest.
Locate the alert(s) below that are indicated in your letter for suggestions on how to proceed. ALERT NUMBER Alert (1) Alert (2) Alert (3) ALERT MESSAGE Fields were left blank or extraneous data was provided when it was not applicable. See the 2014 census instructions for information on how the data was used. It appears as though there are duplicate employee records on your census. Please be aware that your tests include all employee records as provided. Certain employees on your census were coded with a termination date in a prior plan year; however, compensation and/or contribution data was indicated and a rehire date was not provided. If they have met age and service requirements of your plan prior to the termination date, we have included them on your tests as eligible participants. SUGGESTED ACTION Review your census. If any information was left blank for an eligible participant, your test results may be affected. This alert will only appear if there is an impact. For example, if compensation was left blank for a participant who was not deferring, you would not see this alert because your tests would not be affected. Review your census. There may be individuals with the same name but different Social Security numbers who are, indeed, the same person. Your tests will reflect each social security number as a separate participant. Review your census. Find individuals with a termination date in prior plan year that have current year information. In some instances participants may terminate at the end of the plan year and receive compensation for services on the first payroll of the next year. If this is correct, no action is In other instances, participants have rehired and rehire dates were not supplied. In this case, review Additional information regarding rehires in the Census instructions to ensure the individuals are truly eligible. If a participant has inaccurately been reflected as eligible, contact us to help you determine if revised data should be submitted. Alert (4) Your test results indicate that you may have only reported participants who contributed to the plan. Compliance tests require that both contributing and non-contributing participants be reported. employees (not just eligible participants who are actively contributing to the plan) have been reported. If all employees were not submitted with your original census data, contact us to help you determine if revised data should be submitted.
Alert (5) Alert (6) Alert (7) Catch-up contributions were reported for participants who were either not age 50 by the end of the calendar year or were in excess of the maximum catch-up allowed; therefore, we have added catch-up amounts to deferrals and tested accordingly. We have requested but have not received your matching contribution formula; therefore, we have not been able to forfeit matching contributions associated with ineligible deferrals (i.e., related match). Failure to forfeit related match could result in a discriminatory rate of match to the affected HCEs which may cause a failure of benefits, rights and features under IRC section 401(a)(4). According to your plan document, both union and non-union employees are eligible for your plan. Union employees are not subject to ACP testing. All employees designated as union employees on your census have been excluded from the ACP test. Review your census. If catch-up was allowed for individuals who were not age 50 by the end of the calendar year, no further action is necessary in terms of your tests; however, you may need to issue revised W- 2s if these individuals were allowed to make catch-up contributions in error. If there are errors in date of birth records, contact us to help you determine if revised data should be submitted. Provide your Matching Contribution formula to us. You may also want to request a retest of your information. If both union and non-union employees are eligible to participate in your plan, no further action is Alert (8) Our records indicate that your plan experienced a short plan year in 2013. Treasury Regulation section 1.401(a)(17)- 1(b)(3)(iii) states that if a plan uses a compensation period of less than 12 months for a plan year, the maximum dollar limit for compensation that may be used for plan purposes, including nondiscrimination testing, must be prorated. To be nondiscriminatory to all participants, we have assumed that you have also elected to prorate the hours requirement for employer contributions for testing purposes. No action is needed on your part. Alert (9) Your adoption agreement excludes HCEs; however, the individuals that you indicated as HCEs were not coded with a plan status code of 8 (i.e., Excluded Class). We have excluded these individuals from all tests. Review your census. If the testing status of 8 was omitted in error, no further action is
Alert (10) Alert (11) Alert (12) Alert (13) Alert (14) Alert (15) Certain employees on your census were coded with either a testing status code or an employment status code that was inconsistent with your plan document, or compensation and/or contribution data was provided for them. If they have met the age and service requirements, they have been included on your tests as eligible participants. We assume all Participating Employers have signed a Participation Agreement and all excludable employees have been properly identified. If you are a member of a controlled group/affiliated service group, we assume all participating employers have signed a participation agreement and all excludable employees have been properly identified. Results could change if amounts contributed are different than the amounts indicated on the allocation that was provided. If you have any questions regarding this information, please contact your plan services consultant. You have indicated in your adoption agreement that only those participants who have completed one year of service and have attained age 21 are eligible to receive the safe harbor contribution. Therefore, an ADP test must be performed for those participants who are eligible to make elective deferrals but not eligible to receive the safe harbor contribution. Since there were no HCEs that were eligible to make elective deferrals and not eligible to receive the safe harbor contribution, an ADP test has not been performed. It is deemed to automatically pass. According to your plan document, your organization is a Qualified Church Controlled Organization (QCCO), therefore, your plan is not subject to nondiscrimination testing. We have completed only the compliance test(s) that are applicable to your plan. If your plan does include any Non-QCCO employees that were not identified on the census as such, please contact your plan services consultant as there may be additional nondiscrimination tests that may be required. Please contact your plan services consultant if you have concerns regarding your contributions and/or allocation listing.
Alert (16) Alert (17) Your plan permits participants to withdraw automatic deferrals within 90 days from the first automatic contribution. If you have a participant request a withdrawal after you receive your test results please contact your AUL plan services consultant for additional information. A retest may need to be performed. Certain employees on your census were reported with contributions but have not met the age and/or service requirement and/or the allocation conditions of your plan. They have been included as eligible participants on your tests. Please contact your AUL plan services consultant for additional information. A retest may need to be performed. Alert (18) Certain employees on your census appear to be eligible for an employer contribution but no contribution was reported for them. Alert (19) According to your census, you employ NHCE(s) with the same last name as an HCE. Please review the definition of an HCE. Alert (20) Your plan document excludes certain classes of employees, however no employees were identified on the census as a member of the excluded classes. employees have been reported correctly. Verify that you have included excluded employees on your census, if you have any. If Alert (21) According to your census, your plan may have experienced a substantial reduction in workforce. Please contact your AUL plan services consultant for additional information. Alert (22) Certain employees on your census did not have compensation provided and did not have a termination date in a prior year. We assume these employees actually had compensation for the current plan year; therefore, they have been included on your tests as eligible participants. Review your census data to ensure all employees with no compensation are correct and did not terminate in a prior year or they should have had compensation provided, a retest may need to be performed.
What to Do With Your Test Results AUL recommends that you print and keep copies of the tests, the completed census, any revisions to your census, and any other information you provided to AUL which was used in the completion of these tests in a folder labeled 2014 Compliance Testing. If the IRS or DOL selects the 2014 plan year for audit, these agencies could potentially request these items for review in the course of their examination. Review the Census Instructions The Census instructions for plan years beginning in 2014 are an important tool to help you complete your census information. In addition, the instructions also provide guidance and information to assist you after you receive your test results. You may find it helpful to review the following sections of the instructions located on the Year End Service Center on esponsor under the Administration tab. Census completion based on plan type How we will use your census information Compliance testing overview Test results review checklist Highly Compensated Employee (HCE) including Top-paid group If you have any questions regarding this information, please contact your plan services consultant.