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Prototype documents and each participant being their own allocation group.


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Are prototype documents allowed to use language that effectively allows for each participant to constitute their allocation group for purposes of a profit sharing allocation?  Effectively the employer is allowed to choose the amount each participant gets in terms of a profit sharing allocation... assuming you are passing top heavy and whatever testing is necessary (general test/cross test).  I have only administered volume submitter and individually designed plans. I have read through 2 or 3 adoption agreements and have not seen anything like this in a prototype document.  

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Plans are either pre-approved or individually designed. Pre-approved plans can (and many/most? do) provide for individual profit sharing allocation groups. There may still be document providers out there that do not include this option for whatever reason, but in the small plan market this is becoming the norm in my opinion.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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