What does ADP represent in payroll terms?

In payroll terms, ADP commonly represents "Actual Deferral Percentage," which is a specific metric used in retirement plans. The Actual Deferral Percentage is a calculation that determines how much deferred compensation, such as 401(k) contributions, employees are making relative to their salaries. This metric is crucial for compliance with regulatory requirements regarding retirement plans, as it helps ensure that contribution limits are not exceeded and that the plan remains nondiscriminatory.

This concept is particularly important when it comes to employer matching contributions and testing for compliance under the Internal Revenue Code. It helps employers assess how effectively they are encouraging employees to save for retirement while still adhering to set guidelines for participation across different employee demographics.

The other options do not accurately reflect a standard payroll term associated with ADP. Automatic Deposited Paycheck is not a recognized term, Automated Data Process does not capture payroll practices accurately, and Actual Defined Pension refers to a type of retirement plan rather than a payroll processing term.