When switching between testing methods for ADP/ACP, when must the amendment be made?

• A. By the end of the plan year being tested
• B. By the end of the calendar year
• C. Within 6 months after the testing
• D. Only at the next open enrollment

Answer: (A)

The correct answer highlights that an amendment to switch between testing methods for Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) must be made by the end of the plan year being tested. This requirement ensures that any changes to the testing methodology are applied in a timely manner to maintain compliance with Internal Revenue Service (IRS) regulations.

Making the amendment by the end of the plan year allows the plan to accurately reflect the new testing method in its annual compliance testing. If this deadline is not met, the plan risks failing to meet the necessary compliance standards and could face corrective actions or penalties. The timing of this amendment is crucial because it ensures that the testing aligns with the contributions made during that specific plan year, thus allowing for definitive conclusions regarding compliance based on the data collected during that time frame.

Other time frames suggested, such as making an amendment by the end of the calendar year or within six months after testing, do not align with IRS regulations. These options could lead to discrepancies in testing results or compliance issues if amendments are not finalized in coordination with the plan year being tested. Additionally, tying amendments to the open enrollment period is not suitable, as it does not relate directly to the compliance testing requirements and deadlines established by the IRS.