New Comparability (Cross-Tested)

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New Comparability (Cross-Tested) 2017-03-23T21:51:53+00:00
Assume the Owners decide to make an annual contribution that would provide the maximum benefit for owners/shareholders under the current tax code provisions. Below is a comparison of the different types of plans available, and the various amounts required to provide the desired benefit.
Name Age Income Traditional New Comparability
Officer/Shareholder # 1 58 $250,000.00 $50,000.00 $50,000.00
Officer/Shareholder # 2 41 $250,000.00 $50,000.00 $50,000.00
Group A   $500,000.00 $100,000.00 $100,000.00
Manager 46 $89,774.00 $17,954.80 $7,181.92
Group B   $89,774.00 $17,954.80 $7,181.92
Staff #1  30  $17,854.00  $3,570.80  $892.70
Staff #2 25  $31,287.00  $6,257.40  $1,564.35
Staff #3 41  $31,399.00  $6,279.80  $1,569.95
Staff #4 46  $30,026.00  $6,005.20  $1,501.30
Staff #5 36  $39,997.00  $7,999.40  $1,999.85
Staff #6 33  $31,622.00  $6,324.40  $1,581.10
Staff #7 42  $39,765.00  $7,953.00  $1,988.25
Staff #8 44  $22,008.00  $4,401.60  $1,100.40
Staff #9 26  $33,718.00  $6,743.60  $1,685.90
Group C   $277,676.00 $55,535.20 $13,883.80
Total   $867,450.00 $173,490.00 $121,065.75
Group A%    57.64%  57.64%  82.60%
Group B%   10.35% 10.35% 5.93%
Group C%   32.01% 32.01% 11.47%

The plan satisfies the non-discrimination regulations because the equivalent benefit percentages (i.e., the real value of the contributions on a future value basis) for all employees are the same.

Additional information can be found in our August 2013 Newsletter titled Cross-Testing: The Right Tool for Many Jobs.