What is required of a plan when determining QNECs for eligibility in the ADP test?

In the context of the ADP (Actual Deferral Percentage) test for 401(k) plans, Qualified Non-Elective Contributions (QNECs) play a crucial role in ensuring compliance with nondiscrimination requirements set forth by the IRS. When determining QNECs for eligibility in the ADP test, the plan must take into account the participation of a specific percentage of Non-Highly Compensated Employees (NHCEs).

This requirement is important because it aims to balance the contribution rates between Highly Compensated Employees (HCEs) and NHCEs, thus preventing discrimination in favor of higher-paid employees. By ensuring that QNECs consider the participation of a certain percentage of NHCEs, plans can maintain a fair and equitable contribution structure that benefits all employees, thereby meeting the regulations governing 401(k) plans.

The other alternatives do not correctly address the requirements regarding QNECs in relation to the ADP test. For instance, while the contribution limits and rates are important, they do not directly relate to the eligibility of QNECs based on NHCE participation rates.