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Actual Deferral Percentage / Actual Contribution Percentage

Ascensus Consulting is an independent third-party administrator that performs required compliance testing and non-discrimination testing for tax qualified defined contribution, defined benefit, and cash balance plans to help ensure that employers are following the rules and laws set forth by the Internal Revenue Service and the Department of Labor.

The compliance tests help verify that contributions are being allocated properly and in a timely manner. The non-discrimination tests help ensure that the plan does not discriminate in favor of highly compensated employees.

The consequences for employers that are not in compliance, intentionally or not, are severe and could include heavy civil or criminal penalties imposed by the Internal Revenue Service or Department of Labor.
  • The ADP test uses mathematical techniques to compare the participation and contribution rates of the highly compensated employees (HCEs) to the non-highly compensated employees (NHCEs) to determine whether the plan is discriminating in favor of the HCEs.
  • The ACP test uses the same computation as the ADP test. For this test, the actual contribution ratio (ACR) for each participant is calculated by adding his/her matching contributions and employee after tax contributions and dividing the result by his/her salary. The ACRs of all HCEs are then totaled and divided by the number of HCEs. This calculation is then repeated for the NHCEs.

Contact us for more information about compliance testing.