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Can you use the Cross-Tested Concept?
| Title |
Age |
Compensation |
Traditional Plan |
Cross-tested Plan |
| President |
55 |
200,000 |
$45,000 |
$45,000 |
| Vice Pres. |
48 |
150,000 |
33,750 |
42,150 |
| Sales |
35 |
50,000 |
11,250 |
2,500 |
| 3 Sec'ys |
25 |
30,000 |
6,750/ea. |
1,500/ea. |
| Total |
|
|
$110,250 |
$94,150 |
- The best Tax Shelter available just got better!
The cross-tested allocation method can be used in all types of qualified plans including
401(k) and profit sharing plans.
- How does the cross-tested method work?
The anti-discrimination rules finalized in 1991 gave a method of comparing defined
benefit and defined contribution plans in testing for discrimination which allowed
greater flexibility in plan design.
- Will the cross-tested concept live forever?
The cross-tested concept is subject to legislative and regulatory changes. The Internal
Revenue Service has indicated that unless the fundamental underpinning of the
regulations are changed, which is unlikely, such disparate results will not be
challenged.
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Responsive
Fairfax, VA 22030