What is the most popular testing period used in plans?

The most popular testing period used in retirement plans, particularly for 401(k) plans, is the annual testing period. This is primarily because many retirement plans are automatically set to evaluate compliance with the non-discrimination testing rules on an annual basis, aligning with the plan year. Annual testing simplifies the administrative process by allowing plan sponsors to review contributions, participation, and other compliance metrics once a year, making it easier to manage and respond to changes in employees' contributions or plan participation over time.

In contrast, shorter testing periods, such as biannual, quarterly, or monthly, would significantly increase the administrative burden and complexity for plan sponsors. These testing intervals could lead to more frequent adjustments or corrective actions that may confuse employees and disrupt the overall plan management. Therefore, the annual testing period stands out as the most effective and practical solution for ensuring compliance while minimizing administrative effort.