Contribution
- Pro-Rata/Salary Ratio formulas allocate the same percentage of compensation to all plan participants
- An owner receiving 20% of their salary must also contribute 20% to all eligible employees
- Uniform; no flexibility
- Age Weighted formulas allow higher contributions for older employees
- Equally paid employees may receive different allocations based on their ages
- An older employee could receive a higher allocation than a younger owner
- Integrated/Permitted Disparity formulas take compensation in excess of the Social Security Taxable Wage Base into account
- Additional allocations are permitted for those with compensation over the integration level
- Employee cost is still high
- New Comparability/Cross-Tested/Tiered formulas can allocate different percentages of compensation to each plan participant
- Owners maximize contributions while limiting the cost for employees
- Most flexible
New Comparability allocation formulas and Cross-Testing are included in our annual administration package for no additional fee.
