Common use of ADP TESTING LIMITATIONS Clause in Contracts

ADP TESTING LIMITATIONS. (a) PRIOR YEAR TESTING - If elected by the Employer in the Adoption Agreement, the ADP for a Plan Year for Participants who are Highly Compensated Employees for each Plan Year and the Prior Plan Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year must satisfy the basic limit set forth in (1) or the alternative limit set forth at (2): (1) The ADP for the Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Prior Plan Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year multiplied by 1.25; or (2) The ADP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Prior Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees does not exceed the ADP for Participants who were Non-Highly Compensated Employees in the Prior Plan Year by more than two (2) percentage points. (b) For the first Plan Year of a Plan, where the Plan permits a Participant to make Elective Deferrals and the Plan is not a successor Plan, for purposes of the foregoing limits, the Prior Plan Year's Non-Highly Compensated Employees' ADP shall be 3%, unless the Employer has elected in the Adoption Agreement to use the current Plan Year's ADP for these Participants.

ADP TESTING LIMITATIONS. (a) PRIOR YEAR TESTING - If elected by the Employer in the Adoption Agreement, the ADP for a Plan Year for Participants who are Highly Compensated Employees for each Plan Year and the Prior Plan Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year must satisfy the basic limit set forth in (1) or the alternative limit set forth at (2): (1) The ADP for the Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Prior Plan Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year multiplied by 1.25; or (2) The ADP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Prior Year's ADP for Participants who were Non-Highly Compensated Employees for the Prior Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees does not exceed the ADP for Participants who were Non-Highly Compensated Employees in the Prior Plan Year by more than two (2) percentage points. (b) For the first Plan Year of a Plan, where the Plan permits a Participant to make Elective Deferrals and the Plan is not a successor Plan, for purposes of the foregoing limits, the Prior Plan Year's Non-Highly Compensated Employees' ADP shall be 3%, unless the Employer has elected in the Adoption Agreement to use the current Plan Year's ADP for these Participants. 76 (c) CURRENT YEAR TESTING - If no election is made by the Employer in the Adoption Agreement, the ADP limits in (1) and (2), above, will be applied by comparing the current Plan Year's ADP for Participants who are Highly Compensated Employees with the current Plan Year's ADP for Participants who are Non-Highly Compensated Employees. This election can only be changed if the Plan meets the requirements for changing to Prior Plan Year testing set forth in IRS Notice 98-1 (or superseding guidance).