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An Age-Weighted Plan is a profit sharing plan in which the employer contribution is allocated to provide an assumed retirement benefit at normal retirement age. The Age-Weighted allocation, when accumulated to normal retirement age (i.e. 65), would purchase an equivalent retirement benefit as a percent of compensation.

This type of plan is also tested for nondiscrimination pursuant to Section 401(a)(4) of the Internal Revenue Code. The calculations involved are complex, but similar to a new comparability plan, these plans tend to yield larger contributions for the older participants who are typically the owners.

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