'Cross testing' rules permit a defined contribution plan to be considered nondiscriminatory on the basis of the benefits that will be provided, rather than how employer contributions are allocated. These types of plan allocations are skewed to favor a certain group of employees. The allocation method for these plans will vary from year to year dependent upon the level of contribution and the census data. There are several factors which will take part in calculations for favoring the elected group. The plans are subject to complicated non-discrimination testing of Code Section 401(a)(4) and are generally more costly to the employer.
This plan will allow the highly compensated employees a greater benefit. Please contact Employee Incentive Plans, Inc (EIP) if you would like to discuss these methods in detail.