FAQ 624: ADP--Using borrowing, HCE refund incorrect for ACP |

Problem: Test is showing a return to 2.72% for the HCEs on the ACP Calculated Adjustments page, but this doesn' t look correct. Where does it get this number? |

Solution: Here is how borrowing works, using the following starting percents: Orig ADP Orig ACP HCE 7.69 2.79 NHCE 3.36 .72 Correct the failing ADP (resulting in HCE returns from 7.69 to 5.36), so new percents are: Corrected ADP HCE 5.36 NHCE 3.36 Now borrow, taking the HCE/nonHCE ADP down to 4% and 2%: HCE 4.00 >>> borrow 1.36 to ACP >>> 4.15 nHCE 2.00 >>> borrow 1.36 to ACP >>> 2.08 Now ACP is still failing, so need to do a return from: 4.15 - (2.08 2.0) = .07 Apply the .07 reduction to the original ACP: 2.79 -.07 = 2.72% The required reduction is applied to the original ACP since the borrowing is just a "numbers game". |