Profit sharing plan

New Comparability Plans

A New Comparability Plan is a profit sharing plan in which the employees are divided into “rate groups”, with each group receiving a contribution that is a different percentage of compensation. The simplest type of grouping is to have the owners in one group and all other employees in another group. Some employers have several groups such as owners, managers, clerical staff, professional staff, etc.

This type of plan is tested for nondiscrimination on a cross-tested basis under Section 401(a)(4) of the Internal Revenue Code. The calculations involved in the testing are quite complex, but the formulas tend to provide higher paid employees with larger contributions when compared to a traditional profit sharing plan.

Traditional 401(k) Plans

Employer sponsored plan under which employees can elect to contribute a portion of their wages to a retirement plan on a pretax and/or after tax basis up to a maximum allowed by law.

Safe Harbor 401(k) Plans

A Safe Harbor 401(k) plan is similar to a traditional 401(k) plan, but, among other things, it must provide for employer contributions that are fully vested when made.

Profit Sharing Plans

A profit-sharing plan is a qualified employer sponsored plan in which an employer has the discretion to determine the date and amount of company contributions into the plan.