Guest kgsingletary Posted February 7, 2003 Posted February 7, 2003 Has anyone ever heard of this type of profit sharing plan? I've never heard of this terminology. I'm guessing it is some type of age weighted plan. This is from the February 2003 PEO Insider article by Kelly A. Michel. She refers to this as an option instead of regular New Comp plan when the ages of the owners and employees are close. The example gives allocation of 20% to the two owners, 16.8% to three employees (age 50 - 60) and 6% to employees less than age 50. Wouldn't you be able to accomplish this same allocation with a regular New Comp plan by setting up three rate groups and defining them as: Rate Group 1 is owners, Rate Group 2 is non-owner employees over age 50 and Rate Group 3 all other employees?
AndyH Posted February 10, 2003 Posted February 10, 2003 kgsingletary, It looks like this formula might be tested on a contributions basis as opposed to a benefits basis. This might work if you have HCEs in the lowest group. And you'd have to test using permitted disparity. The advantage would be that the gateway rules would not apply if, for example, the plan is top heavy and you have some people getting only 3%.
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