FAQ 619: ADP--Prior year test saying "passes automatically because there are only HCEs" and not printing non-HCE detail listing


I am running an ADP test based on prior year non-HCE percents. The test is not printing any of the non-HCE details and it is printing a message that the test passes because only HCEs are participating. There were non-HCEs last year, so why is it saying this?


You must have prior year non-HCE counts on the ADP Counts (ADPCOUNT) screen in the Values section of the plan specs. These counts must be entered for the ADP and ACP, as well as the under statutory ADP and ACP if it is disaggregated. In addition, if the test is being run by location using our expanded location functionality, these values must be entered on the Locations screen in the plan specs in the "Number for ADP/ACP test" fields. These values are populated automatically during the annual update when the plan is rolled forward, however you will need to input them yourself if it is a new or takeover plan. These values do not have to be the exact count, but just need to be non-zero (except if you disaggregated last year but are not this year; then the counts must be exact to generate the combined prior year percentage). We had a flurry of complaints last tax season that the system was showing plans with no non-HCE's coded as failing ADP. Clients indicated that in fact the plans had no non-HCE's participating, and that they should pass automatically. When we added this option, we had to find a way to still allow the prior year non-HCE percentages to be recognized. The compromise was to require that there be non-HCE counts on the ADP Counts screen, so that the system saw there really were participating non-HCEs and that the prior year non-HCE percentages should be used for the test.