R083675 - (USA) 401(k) Discrimination Results
After you run the tests to determine key employees and the test that accumulates the results of all previous tests for the current year (average deferral percentage (ADP) and average contribution percentage (ACP)), you run the 401(k) Discrimination Results report (R083675) to determine compliance with governmental regulations for qualified plans.
The 401(k) Discrimination Results report (R083675) performs two tests. In the first test, the ADP and ACP of the nonhighly-compensated employees (NHCE) is multiplied by the multiplier that you entered in the first processing option. If the ADP and ACP of the highly-compensated employees (HCE) is less than the result, the organization passes the test, and the report indicates that the HCE are not overly contributing to a 401(k) plan.
If the first test fails, you run the second test. This test has two parts. To meet the government requirements for NDT, the organization must pass both parts of the second test.
The first part of the second test multiplies the ADP and ACP of the NHCE by the multiplier that you entered in the second processing option. If the ADP and ACP of the HCE is less than the result, the report results indicate that the HCE are not overly contributing to a 401(k) plan.
The second part of the second test adds the ADP and ACP of the nonhighly-compensated group to the factor that you entered in the third processing option. If the ADP and ACP of the HCE is less than the result, the report results indicate that the HCE are not overly contributing to a 401(k) plan.
Data selection for this test must be based on the ADP/ACP test for the test year.