If a plan shifts deferrals to help pass the ACP test, must both tests be run on the same method?

When maintaining compliance with the Actual Contribution Percentage (ACP) test in a 401(k) plan, it is crucial to ensure that the testing methodologies for both the ACP test and the Actual Deferral Percentage (ADP) test are aligned.

Using the same testing method for both the ACP and ADP tests provides consistency and clarity in interpreting contribution patterns across different participant categories, such as highly compensated employees versus non-highly compensated employees. If a plan makes shifts in deferrals to pass the ACP test—where contributions can be adjusted to meet necessary compliance levels—aligning this adjustment with the method used for the ADP test is essential. This alignment helps ensure that the tests accurately reflect the same population of participants and that the results are comparable.

Thus, when a plan shifts deferrals, the requirement to run both tests using the same methodology is not just administrative efficiency; it is critical for ensuring equitable treatment of contributions and avoiding issues that could arise from discrepancies between the two tests.