New Comparability, also referred to as Cross Tested, is still one of the best-kept secrets in the retirement plan market. The basic principal behind these plans is that they allow employers to put their workforce into groups or "tiers," and then make different contributions to the tiers. In its simplest form, this type of plan would have the owners in a top tier and everyone else in a second tier. The owners can then receive the maximum contribution in their qualified plan with as little as 3% or 5% (depending on the demographics of the company) going to the second tier. However, since this is truly a profit-sharing plan, contributions are discretionary and employers can vary – or choose to skip altogether – the amount of contributions to the plan from year to year.

Though these plans can be used in any type of business, they work extremely well for professional groups such as physicians, attorneys, engineers, architects, CPA's, etc. Traditionally, these businesses would have a Money Purchase Pension Plan and/or an Integrated Profit Sharing Plan in an attempt to get their key people a higher contribution inside a qualified plan. With a New Comparability plan, however, key employees in these types of businesses can frequently maximize their contribution while keeping the employee contributions the same. Or, if the key personnel are already receiving the maximum allowable contributions, implementation of a New Comparability plan may reduce the amount they must contribute to the plan for the rest of their employees. In fact, it's not uncommon for the business owners and/or key employees to receive up to 90% or more of the overall plan contributions.

Another aspect to this plan that many business owners find appealing is that it virtually allows them to build a "bonus plan" inside the qualified retirement plan. Most businesses already have some form of a bonus or incentive plan for at least their key employees. New Comparability allows the business to move all or a portion of that money inside the qualified plan, which offers some significant advantages to both the employees and the business.

Please Complete an Employee Census if you are interested in this plan.