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Plan Documents

Cross-Tested Profit Sharing Plans Package

Note: Effective July 1, 2015, this package is no longer available.

TRI Pension Services' Cross-Tested Profit Sharing Plans package, which was last updated in September 2002, provides 3 helpful practice tools:

  • A summary of the regulations published in 2001 that prescribe "gateway" requirements for cross-tested defined contributions plans
  • Sample plans formulas, with related SPD language and commentary
  • A commentary on the inclusion of a 401(k) arrangement in a cross-tested profit sharing plan, with examples

The summary of the regulations in Section I of the package describes in detail the "gateway" contribution requirement that most defined contribution plans must satisfy before they may be cross-tested under IRC §401(a)(4). The summary also explains the exception from the gateway contribution requirement for certain plans that use age-based or service-based allocation schedules.

The sample formulas in Section II offer the most flexible and practical methods for designing a profit sharing plan to take advantage of cross-testing principles. There are four sample formula options:

  • Discretionary contributions to separate allocation groups (often referred to as the "new comparability" profit sharing plan approach
  • Discretionary contributions allocated under an age-weighted allocation method
  • A "super-integrated" formula which allows the employer, through the manner in which it makes discretionary contributions, to create a "cross-tested" allocation based on designated compensation tiers, or to provide for a "safe harbor" permitted disparity allocation, depending on the contribution objectives for a particular plan year
  • The coverage of different groups of employees in separate profit sharing plans. The extensive commentary following each formula option will provide the subscriber some insight into the purpose of the formula, advantages and disadvantages of using the formula, and some common alternatives that might be used.

The commentary in Section III on 401(k) arrangements looks at the impact the 401(k) arrangement can have on the gateway contribution requirement, the flexibility it affords individual participants, and the effect on the cross-tested calculations which are performed to demonstrate compliance with the nondiscrimination testing rules.

The Cross-Tested Profit Sharing Plans Package is 73 pages, is available for $150, and is provided ONLY in electronic format (PDF). Please see the column to the right for ordering instructions.

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