Question re allocation formula in money purchase plan

[Guest Gibson]

Can a money purchase plan provide for the following formula: 5.7% integrated formula; provided that each HCE physician in his/her first year of participation is limited to a $500 allocation, and each HCE physician in his/her second year of participation is limited to a $2,500 allocation? Doctors in their first couple of years of practice need as much $ in cash, so they asked regarding limiting allocations during these years.

I don't think there's a discrimination problem because its limited to HCEs, but is there something I'm missing?

[Wessex]

Although it is not explicit in your post, it is implied that the 1st and 2d year doctors will receive $ outside the plan instead of allocations to the plan. If this is the case, this creates a non-qualified cash or deferred arrangement and the resulting problems.

If I misinterpreted the situation, I apologize.

[rcline46]

It would be very unusual for a first year physician to be an HCE (earn over 80/85k in prior year) so first level may not be attainable!

Second you state the formula IS, then you state the Drs. are asked about contributions. A conflict here.

Otherwise, it seems fine.