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Nondiscrimination testing

Last Updated March 22, 2009

Definition

Tests that are required to be completed by qualified plans and ERISA-403(b) accounts , to ensure that plan benefits/contributions do not discriminate in favor of officers, shareholders, employees whose principal duties consist in supervising the work of other employees, or highly compensated employees.

Nondiscrimination tests include the following:

Referring Cite

Prop. Treas. Reg. 1.401(a)(4), IRC § 401(a)(4), IRC § 401(k), IRC § 401(m), IRC §  410(b).

Additional Helpful Information

  • SIMPLE 401(k) and Safe Harbor 401(k) plans are not subject to the ADP and ACP nondiscrimination testing, providing they operate within established guidelines
  • Employers that adopt qualified plans should consider consulting with a third-party plan administrator to ensure that the plan is operated in compliance with the Code and other applicable guidance.