3807 / How is the actual contribution percentage (ACP) calculated in determining whether the ACP test is satisfied?
The ACP for a group of eligible employees is the average of their actual contribution ratios (“ACRs”) for the year, computed separately for each employee and to the nearest one-hundredth of one percent. An employee’s ACR is (1) the sum of matching contributions and employee contributions (including any QNECs taken into account) divided by (2) the employee’s compensation ( Q 3891).1 Special rules apply for the first year a plan, other than a successor plan, is in existence.2
Compensation for this purpose generally is the same as under IRC Section 414(s) ( Q 3867), based on the plan year or the calendar year ending within the plan year; the period selected must be applied uniformly for every eligible employee under the plan.3
A matching contribution is (1) any employer contribution, including a discretionary contribution, to a defined contribution plan on account of an employee contribution to a plan maintained by the employer, (2) any employer contribution, including a discretionary contribution, to a defined contribution plan on account of an elective deferral ( Q 3760),4 and (3) any forfeiture allocated on the basis of employee contributions, matching contributions, or elective contributions.5