Can a plan use different testing methods for the ADP and ACP tests?

The ability for a plan to use different testing methods for the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests is indeed based on the stipulations outlined in the plan documents. When a retirement plan specifies its testing methods in its governing documents, it can adopt different approaches for the ADP and ACP tests as long as these methods are clearly defined and compliant with IRS regulations.

This flexibility allows plan sponsors to tailor their testing strategies based on the specific characteristics of their plan and their workforce, provided there is adequate documentation. The key factor is that the differentiation in testing methods must be clearly articulated in the plan documents, ensuring that all parties understand the terms and criteria being used.

Other choices, like the requirement for the methods to be the same or conditional approval by the IRS, do not accurately reflect the regulations governing retirement plans. Hence, the correct choice stems from the importance of plan documents in outlining the allowed methodologies for these important compliance tests.