"Age Neutral" Plans

[mwyatt]

My boss just brought back a proposal from a brokerage firm contrasting several different types of profit sharing plans for a potential client, including an "Age Neutral" plan. I presume that this is a class-based profit sharing plan ala New Comp, except that you do your General Testing on contributions, rather than accrual rates. Could I get a confirm on this?

(As an aside, I think that the proposal demonstrated the danger of proposal software falling into the wrong hands. Their proposal had the 4 sons of the owner in their own group getting 25% of comp, a second group of NHCEs at 23.5%, and a third group including the owner HCE and remaining NHCEs at 3%. I thought that the 5% threshold should apply - right or wrong if not testing on accruals but benefits? Second off, I have a hard time figuring out how you would pass a General Test with 4 of your 5 HCE rate groups having 0% ratio percentages - since no NHCE had an equal or higher rate.)

[AndyH]

Sounds to me like it's being tested on a contibutions basis with permitted disparity being imputed. Might pass (I don't have my cheat sheets with me to be sure). The 5% gateway would not apply because it's not cross tested.

p.s. Yes, that's right, depending upon the comp levels, imputing permitted disparity can make the allocation rates for the NHCEs at 23.5% higher than the HCEs at 25%, so it may well work.