What you need to know about ADP/ACP discrimination testing

Description

Abstract: Each year plan sponsors must test 401(k) plans to ensure that the contributions made by and for rank-and-file employees, also known as non–highly compensated employees (NHCEs), are reasonably proportional to contributions made for highly compensated employees (HCEs), generally the company’s owners and managers. This article examines what all employers should understand about the tests — known as the actual deferral percentage (ADP) test and the actual contribution percentage (ACP) test.