New Comparability/Cross-Tested

Achieve Your Special Objectives with This Unique Plan

The concept behind this special variety of profit sharing plan is that greater benefits may be provided for targeted key employees, especially if they are older and have fewer years on average to accumulate retirement benefits compared to other employees. This type of plan may either be a standalone profit sharing plan or the profit sharing contribution component of a 401(k) plan.

Is This Type of Plan Right for You?

If key employees in a business are generally older than other employees, and you want them to receive an employer contribution which is a larger percentage of their compensation compared to other employees, then this type of plan is something you should consider. This plan meets this goal by dividing employees into two, three or more groups chosen by the plan sponsor, then determining contributions separately for each of these groups in a manner that maximizes the benefits for the year to the group(s) of employees the employer wishes to reward the most. A typical objective for a plan sponsor is to maximize the contributions for owners and more highly compensated employees, whose efforts more directly generate the profits to fund the plan contribution, while minimizing contributions for other employees.

Make the Most of This Unique Opportunity

As with all plans, we will first consult with the plan sponsor regarding the benefits and financial objectives of having a retirement plan. Only then will we move ahead to load employee data to illustrate how powerful this allocation method may work. If the results are favorable, we will then install the plan in a manner to ensure all government rules will continue to be followed.

Every year, we will work closely with you to optimize the allocation of the year’s contribution to favor those groups of employees which are targeted by the plan sponsor to benefit the most. This process involves a special multiple-part actuarial nondiscrimination test which must be passed every year. If the nature or number of allocation groups needs to change to pass the test or to meet the employer’s changing objectives better, we will consult with our client to make any changes to ensure it continues to be the best plan.


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