For employees who don’t meet allocation conditions, are they still counted in ADP testing calculations?

In the context of ADP (Actual Deferral Percentage) testing, employees who do not meet specific allocation conditions are not included in the calculations. The ADP test is designed to ensure that the contributions made by eligible employees do not disproportionately favor highly compensated employees over non-highly compensated employees.

To qualify for consideration in this testing, employees typically have to meet certain criteria, such as being eligible for contributions or having participated in the plan during the testing year. If they do not meet these allocation conditions, they are disregarded in the calculations, allowing for a more accurate assessment of the plan's compliance with nondiscrimination requirements. This ensures that only those who have demonstrated eligibility and participation are included in the testing, maintaining the integrity of the plan's compliance with IRS regulations.

Thus, only employees who meet the conditions for allocation will be accounted for, reinforcing the importance of understanding the specific eligibility criteria when conducting ADP testing.