Bubbles LLC is a web design company that operates out of Boulder, Colorado. Mark and Jeff started Bubbles twenty years ago and it has grown to be one of the more sizeable web development firms in Colorado. Bubbles offers a 401(k)/profit sharing plan. The plan has the following characteristics:

• Eligibility: age 21 and one-year of service

• Match: dollar for dollar match

• Vesting: 20% per year (years 1 through 5)

• Highly compensated definition: uses top 20% election

• Profit-sharing contribution: Bubbles generally makes a sizeable contribution, but the percentage varies.

• The plan has been amended to permit in-plan Roth rollovers.

• The plan permits rollovers from other qualified plans and IRAs

EE#	Employee	Ownership	Age	Tenure	Salary	Deferral
1	Mark	60%	48	20 Years	$200,000	$10,000
2	Jeff	30%	49	20 Years	$150,000	$15,000
3	Chad	6%	33	15 Years	$75,000	$5,250
4	Josh	4%	42	10 Years	$85,000	$5,100
5	Alex	0%	58	8 Years	$60,000	$0
6	Shay	0%	29	6 Years	$75,000	$4,500
7	Lisa	0%	53	4 Years	$50,000	$0
8	Alison	0%	19	2 Years	$60,000	$0
9	Chung	0%	25	8 Months	$24,000	$0
10	Chau	0%	19	6 Months	$18,000	$0

A. What is the most that bubbles could contribute to the profit-sharing plan for the current year assuming this salary deferral stay constant?

B. What is the actual deferral percentage for the highly compensated employees, as well as the non-highly compensated employees?

C. Does the plan pass the ADP test? Why or why not and what can the company do if the plan does not pass the test?