Age neutral plans?

[Guest Tom Freeman]

Can anybody explain the difference in plan language between a new comparability plan and an age neutral plan?

I s there a source for sample language of the age neutral plan?

Kelly

[Guest BobParks]

I'm familiar with two age neutral plans. Guardian Life Ins. Co. of American out of New York and National Life Ins. Co. of Montpelier , Vermont both have plan documents.

I'm not sure I can describe in a few lines the "formula" that fills pages but in very rough form.

National Life's plan divides the participants into at least three groups.

Group 3 is the highly compensated.

Group 2 is a balance group

Group 1 is all others.

After computing permitted disparity each groups allocation is tested for discrimination. Group 2, selected by objective standards receives an allocation close to Group 3's, both groups receive a much higher allocation than Group 1.

Group 2 will be longer term employees. In a census of about 10 with 2 HCEs Group 2 might require 3 or perhaps 4 NHCE but long term employees to make the numbers work.

[Lorraine Dorsa]

The type of plan you describe is sometimes called an "ageless" plan. It is mostly of theoretical interest because of the high level of contributions required to a group of NHCEs. This type of plan imputes defined contribution permitted disparity to support the contributions to the HCEs. This requires a contribution of about 13% of pay to a group of NHCEs in order to support a $30,000 contribution to the HCEs.

I've considered it for some clients, but have only found 1 or 2 situations in which it made sense (younger HCEs, a group of NHCEs to whom the er wanted to make a large contribution, lots of other NHCEs).