Age Neutral Plans

[Guest Richard Scheer]

Does anyone know what an "age neutral" plan is?

A client has asked if this would benefit him. Owner is 35 and new-comparability won't work. He was advised by friends to look into an age-neutral plan.

From everything I can find, we would define 3 rate groups - owner, nhce1 and nhce2. We would then classify the younger nhces into the nhce1 group and the older nhces into the nhce2 group.

Nhce1 would get a higher allocation rate than the owner and nhce2, while nhce2 would get a smaller rate.

Everything is then tested using the general test.

Is this correct? or am I missing something?

Any help would be appreciated.

Thanks.

[Tom Poje]

this sounds correct, but is no different than any other cross tested class plan. remember in 2002 you would have to provide a 5% minimum gateway to all nhces.

A 35 year old owner plan does not lend itself well to cross testing, unlesss the NHCEs are that much younger.

Ignoring imputing disparity, you have:

if NHCE = 25 yeard old...

1.085^10 = 2.26 (10 year difference in age)

this means the owner could get a contribution 2.26 times that of the 25 year old. so if you gave a 5% contribution, the owner could get 11.3%. but that would only get the rate group to pass if you had one other nhce. you still have to pass the avg ben % test.

and if one NHCE quits....

It just doesn't sound like an ideal choice of plans with such young ages and small population. it may work one year and then BOOM