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Carve out more plan benefits for yourself

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We've discussed age-weighted profit-sharing plans designed to provide older business owners with the lion’s share of the firm’s retirement plan benefits. But there’s another alternative.

Strategy: Consider a “new comparability plan” for your small business. This version of a qualified plan further skews contributions in favor of highly paid employees.

Here’s the whole story: The basic objective for many retirement-savers is to sock away as much as they can in as short a time as they can. This is especially important to older entrepreneurs. However, due to the strict nondiscrimination rules in the tax law, a company generally can’t favor highly compensated employees (HCEs) over non-HCEs (see below).

That’s where a new comparability plan can come to the rescue. Under this “cross-tested plan,” employer contributions are allocated based on a formula established in the plan document. Generally, plan participants are divided into ...(register to read more)

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