New Comp formula requirements in plan documents.

So, a profit sharing plan needs to define a "Contribution Formula" and an "Allocation Formula" in order for the plan's contribution to be definitely determinable. In many plan documents when you select a new comparability - each employee is own group formula, no additional "method" on how to allocate the contribution formula is required. For example, no additional input is required to establish if each group will receive a flat dollar, % or the greater of the two.

However, its different when we select new comparability - groups, documents tend to make you establish in the plan document whether the contribution formula will be allocated via flat dollar, % or the greater of the two.

I can reason why this may not be required for new comp - each employee is own group. But my question is this, is it actually required that the plan document define in new comp - groups that each group will be allocated the contribution based on flat dollar, % of comp or the greater of the two? Couldn't that simply be provided in writing to the plan administrator to satisfy the definitely determinable requirement?

If everyone is in their own group, any dollar amount you get is both a % of pay and a flat dollar amount.  If you made $100,000 and get a $2,200 contribution, your "group" got both a $2,200 flat dollar amount and a 2.2% of pay contribution.

I agree, 100%. That is the reasoning behind each employee is their own group not having the option.

But is including the option to distinguish between (%, $ or highest of the two) per group a requirement to be included in plan document when the option is not new comp - each employee is own group in order to be definitely determinable?

Well, lots of documents with that language have received satisfactory Opinion and Determination Letters...

HA, I can't argue with that.

2 hours ago, Purplemandinga said:

But is including the option to distinguish between (%, $ or highest of the two) per group a requirement to be included in plan document when the option is not new comp - each employee is own group in order to be definitely determinable?

Yes. Otherwise, from year to year, a group may get X% of pay as a contribution one year and then a flat $X another year - the allocation formula for the group is not definitely determinable, you don't know how you're contribution will be allocated. Think of the group - whether it's one person, 100 people or 1,000 - you must specify how you are allocating to the group. The method cannot be discretionary for the employer, only the per-group amount (or percentage) is subject to discretion.