This is a Profit Sharing Plan that has pre-established allocation groups written into the plan document (such as Owners, Management, and All Others). As in all profit sharing plans, the contribution each year is entirely discretionary.
The New Comparability method gives even further control to the plan sponsor by allowing different contribution percentages to be given to each group as long as complex non-discrimination tests are passed. For example, 20% of pay to the owners group, 8% to the management group, and 5% to all others. This type of plan gives the greatest amount of control to the employer.
Who is a New Comparability plan right for?
- Businesses of any size seeking the greatest control over the allocation of employer contributions.
- Businesses of small to moderate size (such as Doctor or Dentist Practices) where greater contributions for a select group are desired.