True or False: All testing, including elective deferral shifting, must be completed before assessing excess contributions eligible for recharacterization.

The statement is true because all necessary testing for a 401(k) plan must be fully completed prior to evaluating any excess contributions that might be eligible for recharacterization. This includes various compliance tests such as the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests, among others. These tests are designed to ensure that the contributions made to the plan comply with IRS regulations, and only after completing this comprehensive testing can the plan sponsor determine whether there are any excess contributions that need to be addressed.

Recharacterization refers to the process of changing the nature of contributions, often to mitigate tax consequences arising from excess contributions. Without the results of the required testing, a plan sponsor will not have a clear understanding of whether they have exceeded contribution limits, which could lead to improper handling of contributions and potential penalties. This makes it crucial to complete all testing first.

The other options do not accurately capture the requirement that all testing be completed beforehand, as they introduce unnecessary conditions which might suggest exceptions to the general rule that applies to all plans, regardless of size or contribution levels.