NEW COMPARABILITY PLANS
The exciting new plans that mean great news
for business owners and principals.
Good news! New IRS regulations now allow businesses and professional
practices to establish a new and exciting type of profit sharing plan,
popularly known as a new comparability plan.
What is a new comparability plan?
A new comparability plan is an entirely new type of profit sharing plan
which allows very substantial contributions for a favored and, on aver-
age, older group, with much lower contributions for the other employ-
ees.
In some cases, annual contributions can be as high as 25% of pay or
$30,000 each for an older, highly compensated group of employees,
with as little as 3% of pay to the accounts of younger, non-highly
compensated employees.
How is that possible?
IRS regulations now allow employers to divide plan participants into two
or more classes, and, in many cases, to make much larger contribu-
tions to the plan for one class than for another.
And, they provide a method, based on an analysis of projected benefits at
retirement age, of showing that the benefits provided to highly compen-
sated and non-highly compensated employees are comparable and are
therefore not discriminatory.
BOYCE
& ASSOCIATES, INC.
ACTUARIES, CONSULTANTS
RETIREMENT PLAN ADMINISTRATORS
7098 East Cochise Road, Suite 200, Scottsdale, AZ 85253
Phoenix (480) 948-8879Tucson (520) 888-1201Fax (480) 948-0448
The Newsletter about developments in Employee Benefits, brought to you by
THE BENEFIT HIGHLIGHTER
The Tax Reform Act of 1986 made
retirement plans generally less
attractive for business owners.
By contrast, the new comparability
plans offer substantial incentives and
new benefit planning opportunities.
Traditional profit sharing plan
+
Division of participants into classes
with annual contributions determined
separately for each class
+
Analysis of projected benefits
to show that highly compensated and
non-highly compensated employees
receive comparable benefits
=
New comparability plan with BIG
contributi