"We're Thinking Forward"

A New Comparability Plan is a profit sharing plan in which the employees are divided into “rate groups”, with each group receiving a contribution that is a different percentage of compensation. The simplest type of grouping is to have the owners in one group and all other employees in another group. Some employers have several groups such as owners, managers, clerical staff, professional staff, etc.

This type of plan is tested for nondiscrimination on a cross-tested basis under Section 401(a)(4) of the Internal Revenue Code. The calculations involved in the testing are quite complex, but the formulas tend to provide higher paid employees with larger contributions when compared to a traditional profit sharing plan.

...We're Thinking Forward