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February 16, 2009

Nondiscrimination testing

Your Guide

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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.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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