3802 / How does a 401(k) plan satisfy the nondiscrimination in amount requirement?
A cash or deferred arrangement will be treated as meeting the nondiscrimination requirement of IRC Section 401(a)(4) if it satisfies the Actual Deferral Percentage (“ADP”) test ( Q 3803).1 A plan can satisfy the ADP test by annually meeting the requirements of the ADP test itself, by satisfying the design-based requirements for a SIMPLE 401(k) plan ( Q 3778), or by satisfying the design-based requirements for a safe harbor plan ( Q 3773).2
In plan years beginning after December 31, 2007, a “qualified automatic contribution arrangement” will satisfy the ADP test requirement ( Q 3762).3 The final regulations cited here took effect for plan years beginning on or after January 1, 2006.4
A plan will not be treated as violating the ADP test merely on account of the making of (or right to make) catch-up contributions by participants age 50 or over under the provisions of IRC Section 414(v) so long as a universal availability requirement is met ( Q 3761).5