Cross tested Profit sharing plan and discrimination issues

[Guest smhjr]

I'm pretty much just looking for opinions because I don't think there is a clear cut answer to this question (or maybe there is). I have a client that is a group of doctors. There are 10 partners, 3 other highly compensated employees, and approximately 30 non highly compensated employees.

The issue is on the 3 non-partner highly compensated employees. Two of them are basically regular employees, the office manager and the CFO. They make approximately 90,000-95,000 each. The third is a physician that makes $300,000+ per year in salary.

This physician is fairly young so it is messing up all of the discrimination numbers. The company is considering excluding her from benefitting all together. The thought process was to create a group that is non-partner physicians (there are others that will fall into this group in subsequent years, they just aren't eligible yet).

Excluding her allows the plan to pass all applicable discrimination testing.

My concern though is that she is the only women physician. If the other non-partner physicians do not stay at the company they may never become eligible. Do you think the client could be opening themselves up to a sexual discrimination lawsuit?

[Leopurrd]

Just a thought to pass along,

When I attended Corbel's X-Test class last year, they mentioned that you could amend the plan to allow for the one person who was messing up testing to be in their own rate group (by name) - could you do this and lower her %? I wouldnt think that would be discrimination per se?

I know it sounds weird, but according to Corbel if they have the appropriate fail-safe provisions in the doc it is allowed.

HTH,

Vicki

[AndyH]

smhjr, the solutution to your situation is to put her in the same group as the NHCEs and to restructure the plan into component plans for testing purposes and test her on a contributions basis.

If you give me some details on the eligible population I'll try to give you an example.