QKA-2 PrActice exAm 2 mOSt receNt 2026 WitH cOrrect ActUAL
QUeStiONS AND cOrrectLY WeLL DeFiNeD ANSWerS LAteSt ALreADY
GrADeD A+
Which of the following types of employee contributions are included in the ADP test?
a. Roth contributions and pre-tax elective deferrals
b. Roth contributions, pre-tax and rollovers
c. Rollovers, QMACs, pre-tax and Roth contributions
d. Roth contributions, pre-tax and after-tax contributions
a. Roth contributions and pre-tax elective deferrals
Contributions included in the ADP test include pre-tax elective deferrals and Roth contributions. QNECs, QMACs
and matching contributions may also be included under certain testing methods.
Which of the following employees would be excluded from the ADP test?
a. An employee who is eligible to defer but chooses not to do so
b. An employee who defers during the year but works less than 501 hours during such year
c. An employee who is in an employee class ineligible to participate in the plan
d. An employee who defers during the year but terminates prior to the last day of the plan year
c. An employee who is in an employee class ineligible to participate in the plan.
Employees who are eligible to defer, whether they choose to or not are included in the ADP test. Those who are
not eligible to defer at all during the year are excluded.
,Which of the following statements regarding prior year and current year testing methods is TRUE?
a. When using prior year testing, an employee that was an NHCE in the prior year and an HCE in the current year
is disregarded for both testing years.
b. A plan that uses the current year testing method may switch to the prior testing method in any subsequent
year.
c. A plan that uses the prior year testing method may switch to the current year testing method in any
subsequent year.
d. A plan may not use the current year testing method for the ADP test when using the prior year testing method
for the ACP test.
c. A plan that uses the prior year testing method may switch to the current year testing method in any
subsequent year.
A plan is not required to use the same method for both the ADP and ACP test. A plan that uses the prior year
testing method may switch to current year for any subsequent year. When using the current year method,
switching to the prior year method may only be done if the current year was used for 5 consecutive plan years or
the life of the plan if less than 5 years.
When using the early participation testing method for the ADP test, which of the following statements is TRUE?
a. Two ADP tests are performed; one for all NHCEs and one for the statutory HCEs.
b. When determining the statutory employees under the early participant test, the statutory age is 18.
c. When determining the statutory employees under the early participant testing method, an eligibility provision
of 6 months must be used.
d. Only one ADP test is performed.
d. Only one ADP test is performed.
Which employees would be in the otherwise excludable category when determining the ADP test for 2022 when
using disaggregation, based on the following information?
* The plan is a calendar year plan
* The plan's eligibility requirements are attainment of Age 18 and completion of 6 months of service
,* The entry date is the first day of the plan year or the first day of the 7th month of the plan year following
satisfaction of the eligibility requirements.
1. PPT A | Age 19 | DOH 4/30/2020 | Plan Entry 01/01/2021
2. PPT B | Age 22 | DOH 09/19/2021 | Plan Entry 07/01/2022
3. PPT C | Age 32 | DOH 8/15/2019 | Plan Entry 07/01/2020
4. PPT D | Age 35 | DOH 8/21/2021 | Plan Entry 07/01/2022
Anwers:
a. Employee A Only
b. Employees A & B Only
c. Employees A, B, & D Only
d. Employees A & D Only
c. Employees A, B and D only
1. Employee A would be in the otherwise excludable group due to being less than age 21
2. Employee B would be in the otherwise excludable group when applying the statutory year of service
3. Employee C is in the plan and would not be part of the excludable group even if a longer eligibility period was
used.
4. Employee D would be in the otherwise excludable group because of not entering the plan until 1/1/2023 if a
year of service eligibility period was used.
When using the early participation testing method, a test including all the HCEs and only the NHCEs who have
met the statutory requirements is run. Those NHCEs who have not met the statutory requirements are not
tested.
, What is one of the advantages of using the prior year testing method over the current year testing method for
ADP purposes?
a. If the NHCE percentage is not large enough, the employer will be able to encourage more NHCE deferrals.
b. It will be known if the HCEs need to have their matching contributions limited.
c. HCEs will be able to defer the IRC 402g maximum without failing the ADP test.
d. The maximum ADP for the HCEs for testing year is predictable.
d. The maximum ADP for the HCEs for testing year is predictable.
The prior year test allows the plan sponsor to know what the passing ADP will be for the HCEs and can plan.
They may limit the HCE contributions, plan on returning excess contributions or making additional qualified
contributions.
When explaining to a plan sponsor the importance of the ADP and ACP tests, which of the following statements
is TRUE?
a. The tests are used to determine if a plan is top-heavy for the plan year.
b. The tests are optional and are only used to give data to the employer on plan participation.
c. The tests apply only to plans with less than 100 employees because they are the ones that tend to favor HCEs.
d. The tests are to ensure that plans do not unfairly benefit the HCEs.
d. The tests are to ensure that plans do not unfairly benefit the HCEs.
The ADP and ACP tets measure the amounts of deferrals and matching contributions to ensure that 401(k) plans
do not unfairly benefit the HCEs.
Based on the following information, when will the plan be able to switch from current year testing to prior year
testing?
QUeStiONS AND cOrrectLY WeLL DeFiNeD ANSWerS LAteSt ALreADY
GrADeD A+
Which of the following types of employee contributions are included in the ADP test?
a. Roth contributions and pre-tax elective deferrals
b. Roth contributions, pre-tax and rollovers
c. Rollovers, QMACs, pre-tax and Roth contributions
d. Roth contributions, pre-tax and after-tax contributions
a. Roth contributions and pre-tax elective deferrals
Contributions included in the ADP test include pre-tax elective deferrals and Roth contributions. QNECs, QMACs
and matching contributions may also be included under certain testing methods.
Which of the following employees would be excluded from the ADP test?
a. An employee who is eligible to defer but chooses not to do so
b. An employee who defers during the year but works less than 501 hours during such year
c. An employee who is in an employee class ineligible to participate in the plan
d. An employee who defers during the year but terminates prior to the last day of the plan year
c. An employee who is in an employee class ineligible to participate in the plan.
Employees who are eligible to defer, whether they choose to or not are included in the ADP test. Those who are
not eligible to defer at all during the year are excluded.
,Which of the following statements regarding prior year and current year testing methods is TRUE?
a. When using prior year testing, an employee that was an NHCE in the prior year and an HCE in the current year
is disregarded for both testing years.
b. A plan that uses the current year testing method may switch to the prior testing method in any subsequent
year.
c. A plan that uses the prior year testing method may switch to the current year testing method in any
subsequent year.
d. A plan may not use the current year testing method for the ADP test when using the prior year testing method
for the ACP test.
c. A plan that uses the prior year testing method may switch to the current year testing method in any
subsequent year.
A plan is not required to use the same method for both the ADP and ACP test. A plan that uses the prior year
testing method may switch to current year for any subsequent year. When using the current year method,
switching to the prior year method may only be done if the current year was used for 5 consecutive plan years or
the life of the plan if less than 5 years.
When using the early participation testing method for the ADP test, which of the following statements is TRUE?
a. Two ADP tests are performed; one for all NHCEs and one for the statutory HCEs.
b. When determining the statutory employees under the early participant test, the statutory age is 18.
c. When determining the statutory employees under the early participant testing method, an eligibility provision
of 6 months must be used.
d. Only one ADP test is performed.
d. Only one ADP test is performed.
Which employees would be in the otherwise excludable category when determining the ADP test for 2022 when
using disaggregation, based on the following information?
* The plan is a calendar year plan
* The plan's eligibility requirements are attainment of Age 18 and completion of 6 months of service
,* The entry date is the first day of the plan year or the first day of the 7th month of the plan year following
satisfaction of the eligibility requirements.
1. PPT A | Age 19 | DOH 4/30/2020 | Plan Entry 01/01/2021
2. PPT B | Age 22 | DOH 09/19/2021 | Plan Entry 07/01/2022
3. PPT C | Age 32 | DOH 8/15/2019 | Plan Entry 07/01/2020
4. PPT D | Age 35 | DOH 8/21/2021 | Plan Entry 07/01/2022
Anwers:
a. Employee A Only
b. Employees A & B Only
c. Employees A, B, & D Only
d. Employees A & D Only
c. Employees A, B and D only
1. Employee A would be in the otherwise excludable group due to being less than age 21
2. Employee B would be in the otherwise excludable group when applying the statutory year of service
3. Employee C is in the plan and would not be part of the excludable group even if a longer eligibility period was
used.
4. Employee D would be in the otherwise excludable group because of not entering the plan until 1/1/2023 if a
year of service eligibility period was used.
When using the early participation testing method, a test including all the HCEs and only the NHCEs who have
met the statutory requirements is run. Those NHCEs who have not met the statutory requirements are not
tested.
, What is one of the advantages of using the prior year testing method over the current year testing method for
ADP purposes?
a. If the NHCE percentage is not large enough, the employer will be able to encourage more NHCE deferrals.
b. It will be known if the HCEs need to have their matching contributions limited.
c. HCEs will be able to defer the IRC 402g maximum without failing the ADP test.
d. The maximum ADP for the HCEs for testing year is predictable.
d. The maximum ADP for the HCEs for testing year is predictable.
The prior year test allows the plan sponsor to know what the passing ADP will be for the HCEs and can plan.
They may limit the HCE contributions, plan on returning excess contributions or making additional qualified
contributions.
When explaining to a plan sponsor the importance of the ADP and ACP tests, which of the following statements
is TRUE?
a. The tests are used to determine if a plan is top-heavy for the plan year.
b. The tests are optional and are only used to give data to the employer on plan participation.
c. The tests apply only to plans with less than 100 employees because they are the ones that tend to favor HCEs.
d. The tests are to ensure that plans do not unfairly benefit the HCEs.
d. The tests are to ensure that plans do not unfairly benefit the HCEs.
The ADP and ACP tets measure the amounts of deferrals and matching contributions to ensure that 401(k) plans
do not unfairly benefit the HCEs.
Based on the following information, when will the plan be able to switch from current year testing to prior year
testing?
