Are employees excluded from participation due to job classification included in the ADP test?

The statement that employees excluded from participation due to job classification are not included in the Actual Deferral Percentage (ADP) test is accurate. The ADP test is designed to ensure that a 401(k) plan does not disproportionately benefit highly compensated employees over non-highly compensated employees.

When performing the ADP test, only the employees who are eligible to participate in the 401(k) plan are considered. If certain employees are excluded based on their job classification, they cannot contribute to the plan, and therefore, their deferrals do not factor into the ADP calculations. The test focuses solely on those employees who are eligible to participate and have made deferrals during the testing period.

This exclusion promotes fairness within the plan by preventing a skewed comparison that could arise from including employees who are not allowed to participate. The ADP test aims to maintain the plan's compliance with IRS regulations, and including ineligible employees would undermine the intent of the test.