new comp allocation groups

[Santo Gold]

Can allocation groups in a new comp plan be defined by name? For example: Group 1 = specific owner, Group 2 = specific owner, Group 4 = all other participants?

Thanks

[BG5150]

Yes.

[Kevin C]

But, keep in mind that if you define groups by name, the plan must pass 410(b) using the ratio percentage test. One part of the average benefit test requires that the plan pass the nondiscriminatory classification test of 1.410(b)-4, which includes a reasonable classification requirement.

1.410(b)-4(b) Reasonable classification established by the employer. --A classification is established by the employer in accordance with this paragraph (b) if and only if, based on all the facts and circumstances, the classification is reasonable and is established under objective business criteria that identify the category of employees who benefit under the plan. Reasonable classifications generally include specified job categories, nature of compensation (i.e., salaried or hourly), geographic location, and similar bona fide business criteria. An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable classification.

[Below Ground]

As solution, you may wish to delineate between owners by ownership, or service, or something (not age) that is different. If needed, you can always make each person their own group.