Which contributions, if any, allow plans to avoid the ACP test entirely?

To fully understand why the correct answer is that QMACs (Qualified Matching Contributions) allow plans to avoid the ACP (Actual Contribution Percentage) test entirely, it's essential to clarify what the ACP test is designed to evaluate. The ACP test serves to ensure that the contributions made by highly compensated employees do not disproportionately benefit them compared to lower-paid employees.

QMACs are specifically structured to meet certain criteria that exempt them from being tested under the ACP rules. When a plan includes QMACs, it is recognized that these contributions are made on behalf of all employees, regardless of their compensation levels, which align with the non-discrimination goals of the ACP test.

In contrast, after-tax contributions and elective contributions are not exempt from the ACP test. These types of contributions can reflect a more direct relationship to the employee's salary or compensation level, which can inadvertently lead to non-compliance with the non-discrimination requirements. Therefore, without the unique allowances provided by QMACs, the plan would need to undergo the ACP test to ensure that it adheres to the applicable regulatory standards.

Understanding the specific role of QMACs within the broader context of retirement plan compliance is crucial for effective plan administration. By enabling plans to bypass the ACP test, QMAC