New Comparability (Cross-Tested) Profit Sharing Plans

Employer contributions are allocated by percentage to nondiscriminatory classification groups stated in the plan (e.g. owners, all other employees.) Each classification group receives a percentage of the employer contribution, usually with one classification group receiving a higher percentage than the other classification groups. The plan must pass nondiscrimination testing to ensure that non-highly paid employees are receiving an equitable contribution in comparison to the highly paid employees. (Example below.)