Flat Dollar

[Logan401]

Are flat dollar allocations allowed for profit sharing plans, or are they only allowed in pension plans?

I can't seem to find much on this topic.

Thanks!

[Lou S.]

Yes per capita allocations are allowed in a PS plan.

[david rigby]

Logan,

Allocations that are based on flat dollar, in whole or in part, will provide a very favorable basis for non-discrimination testing (ie, the pct is higher as the comp gets lower).

[Guest Eric A]

Take a look at Reg. 1.401(a)(4)-2(b)(2).

[Logan401]

Logan,

Allocations that are based on flat dollar, in whole or in part, will provide a very favorable basis for non-discrimination testing (ie, the pct is higher as the comp gets lower).

Are you saying that this type of allocation needs to be tested?

What if the plan has children of > 5% owners of the firm that are young and have low wages?

[Tom Poje]

as Eric pointed out, (or at least if you referenced the reg he pointed) a plan that alloactes the same amount of cont / participant is 'deemed' to be a safe harbor formula, so no further testing should be needed.

don't know of many owners in this day and age that opt for something like that, but it is possible.

[Logan401]

as Eric pointed out, (or at least if you referenced the reg he pointed) a plan that alloactes the same amount of cont / participant is 'deemed' to be a safe harbor formula, so no further testing should be needed.

don't know of many owners in this day and age that opt for something like that, but it is possible.

Good to know!

Thank you All for your answers.