Isn’t it About Time?
Most small business owners would like more options in the amount of their contribution to employees. Flexibility is now available. Section 401(a)(4) of the Internal Revenue Code allows profit sharing allocations to be divided differently among employees based upon identifiable classification groups. Not only is the amount of contribution flexible, but there is flexibility in the way it is divided among the employees.
This type of profit sharing plan is referred to as a cross-tested profit sharing plan. There are two formulas:
~ Age-weighted plans, in which older employees
~ Classification groups, in which employees are
divided into groups, which each group receiving
a different share of the contribution.
The cross-tested profit sharing plan allows the owner to decide who will benefit more from the firm’s profit sharing contributions based upon objective criteria. The options for classification groups and contribution amounts maximize the effectiveness of the firm’s retirement plan using a cross-tested plan design.
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“Cross-Tested & 401(k) Safe Harbor Profit Sharing Plans” »
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> One service provider for the plan document, funding, annual valuation and federal filing.
> Consultation and evaluation by an experienced pension staff.
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