An employee who cannot make elective deferrals due to IRC limitations is treated as an eligible employee for the ADP test under which condition?

An employee who cannot make elective deferrals due to Internal Revenue Code (IRC) limitations can still be treated as an eligible employee for the Actual Deferral Percentage (ADP) test if the IRC limits do not apply. This is relevant because the ADP test is designed to ensure that the contributions made by higher-paid employees do not disproportionately benefit them compared to lower-paid employees. If an employee is unable to make elective deferrals solely because of these IRC limitations, they may still be considered eligible, allowing them to be included in calculations that assess the plan's compliance with nondiscrimination rules.

In this context, treating such employees as eligible ensures that the testing reflects the total potential deferral that could be made if the IRC limits were not a factor. This approach helps maintain the plan’s integrity and compliance with federal regulations, thus protecting it from penalties and ensuring equitable access for employees across varying compensation levels.

The other conditions, such as prior participation, compensation requirements, or specific employment statuses, do not directly address the impact of IRC limitations on eligibility for the ADP test, making them less relevant in this context.