Cross-Tested 401(k) Profit Sharing Plan Illustration

cross tested 401k profit sharingThe contributions for Cross-Tested Plans are based on the employees’ age, compensation, the employee classes, and the percent of contribution for each class decided by the employer.

Cross-Tested plans (also known as New Comparability or Age-Weighted Plans) work extremely well where the owners or key employees are more advanced in age than other employees. They are generally set up in conjunction with a 401(k) Profit Sharing Plan. The plan can be used with any number of owners, key employees, and other employees. The following is only one example of how a Cross-Tested 401(k) Profit Sharing Plan can benefit your company. This example illustrates the maximum contribution available for the owner while providing the minimum required contributions for the non-owners in order to pass the required nondiscrimination and participation testing:




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Additional assumptions used in above calculations:

  • Total Owner combined Federal & State Income Tax Rate assumed at 45%. You should consult your tax advisor as to the actual tax rates and your actual amount saved.
  • The contribution and percents to the groups can vary year to year at the discretion of the employer, within legal limits.
  • The numbers of participants included in the illustrations were limited for simplicity and comparability. However, all of the plans are able to serve from one to hundreds of participants.

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