If your plan fails the Actual Deferral Percentage (ADP) compliance test, generally, your company will be able to choose 1 of 2 corrective action options:
- Refunding excess contributions to Highly Compensated Employees (HCEs); OR
- Funding employer contributions to Non-Highly Compensated Employees (NHCEs).
A task will be available on your Guideline administrator dashboard in late Q1 to select your desired corrective action. The task will outline the exact dollar amounts for each option, by individual. If you choose to refund excess contributions to HCEs, checks will be mailed to the affected participants in the weeks following your completion of the task. These employees will receive an IRS Form 1099-R in the following year for tax filing purposes.