Allocate the majority of profit-sharing contributions to owners and key employees — legally. We design, test, and administer cross-tested plans that maximize the benefit for the people who matter most to your business.
Request a Plan ReviewNot All Profit-Sharing Is Created Equal
A standard profit-sharing plan allocates contributions as a flat percentage of pay — everyone gets the same rate. New Comparability (cross-tested) plans allow different allocation rates for different groups, as long as the plan passes nondiscrimination testing on a benefits basis. The result: owners can receive 2x, 3x, or more as a percentage of pay compared to rank-and-file employees.
Group-Based
Define allocation groups — owners, managers, staff — with different contribution rates for each. A typical design might give owners 10–15% of compensation while staff receive 5%. The plan passes testing because older, higher-paid participants have less time to accumulate the same projected benefit.
Combo Strategy
Layer New Comparability on top of a Safe Harbor 401(k) to get the best of both worlds: guaranteed full deferrals through Safe Harbor, plus owner-weighted profit-sharing. No ADP/ACP testing on the deferral side, cross-tested allocation on the profit-sharing side.
Flexible
Profit-sharing contributions are discretionary. Contribute more in profitable years, less in lean years. The allocation formula stays the same — only the total dollar amount changes.
Tax Planning
Every dollar contributed to profit-sharing is tax-deductible to the business. For owners in high tax brackets, a New Comparability design can redirect significant dollars from the IRS into retirement savings.
Standard nondiscrimination testing compares contribution rates across groups. Cross-testing converts those contributions into projected retirement benefits (using actuarial assumptions) and compares the benefits instead. Because older participants have fewer years until retirement, they need higher annual contributions to produce the same projected benefit. This is what allows older owners to receive a much higher allocation rate than younger staff — the projected benefits end up being comparable, satisfying IRS rules.
Full-Service Administration
Custom
We model allocation groups, contribution rates, and test results before you commit — so you know exactly what the plan will cost and how much each group receives.
401(a)(4)
We run the general test under 401(a)(4) on a benefits basis, ensuring your tiered allocations satisfy nondiscrimination requirements every year.
410(b) & 416
Cross-tested plans must also pass coverage testing under 410(b) and top-heavy testing under 416. We handle the full compliance package.
Accurate
We calculate individual allocations based on census data, process contributions with your recordkeeper, and provide year-end statements to all participants.
FAQ
Most can, but the plan design works best when owners are older than the average employee age. The larger the age gap, the bigger the disparity in allocation rates that will pass testing. We model your specific demographics during the Plan Design Review to confirm feasibility.
If projected results show a testing failure, we adjust allocation rates or group definitions before contributions are made. Because we run projections early in the year, failures are almost always caught and corrected proactively — not after the fact.
It depends on age differentials. In a typical scenario with owners in their 50s and staff averaging 30–35, owners might receive 10–15% of compensation while staff receive 5%. With larger age gaps, the disparity can be even greater. We provide exact projections based on your census data.
Similar concept, different mechanics. Age-weighted plans use a formula based directly on age and compensation. New Comparability is more flexible — you define groups and rates, then cross-test to confirm compliance. New Comparability generally gives you more control over how dollars are allocated.