The ABA Retirement Funds Program (“Program”) provides both mid-year and year-end nondiscrimination testing upon request for 401(k) plans. Failing the nondiscrimination tests means that your firm’s plan discriminates in favor of highly compensated employees (“HCEs”). The mid-year nondiscrimination test can help you assess whether your plan might pass the test for 2021 and then you can plan accordingly.
Testing is based on information provided by you through the Census and is provided at no additional charge.
The Census is a spreadsheet, on which some information is pre-completed based on information in our recordkeeping system (e.g., participants’ Social Security Numbers, dates of birth, and dates of hire). Plan sponsors who want the Program to provide mid-year nondiscrimination testing will need to complete the remaining information on the Census and return it with the mid-year test request form.
Specific Instructions are provided with the Census related to the information we’ll need from you.
Please Note:
If you elected in your Adoption Agreement to use the current year method of testing, you may correct nondiscrimination failure by making a Qualified Non-Elective Contribution (“QNEC”), which must be made by the date on which your firm’s 2021 contributions are due.
Avoid failing the nondiscrimination tests by encouraging non-highly compensated employees (“NHCEs”) to increase or begin making 401(k) elective salary deferrals. You can use the prior year method of testing and the mid-year nondiscrimination test as a status check, or limit HCE contributions for the remainder of the year. You may also want to consider amending your plan for the remainder of 2021 or 2022 to include a Safe Harbor provision, which would exempt your plan from nondiscrimination testing.
