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HOW IT WORKS

Traditional Plan

Employer contributes a percentage of pay.
Contributions are allocated to the participants based upon an allocation factor.
Each participant's allocation factor is calculated by multiplying compensation times an age factor.
Limitations
Deductions - 25% of eligible pay.
Individual allocation - less of $40,000 for 2005 or a maximum of 100% of compensation.
Costs
Set-up approximately $2,000 - $3,000
Plan document - attorney drafted (No prototype document available.)
Administration - $1,000 - $2,000

Cross Tested Plan

Employer contributes a percentage of pay.
Contributions are allocated at different rates to a classification group of employees.
Plan must be tested yearly for nondiscrimination under nondiscrimination regulations. Testing is done by converting the contributions to benefits at normal retirement age.
Limitations
Deductions - 25% of eligible pay (If profit sharing plan).
Individual allocation - Lesser of $40,000 for 2005 or 100% of compensation.
Costs
Setup - approximately $2,000 - $3,000.
Plan document - Attorney drafted. (No prototype document available).
Administration - $1,000 - $1,500.

NOTE: ALL information contained in this site is for illustration purposes only, and by NO means should be considered individual tax or legal advice under any circumstances whatsoever!

Lynn R. Siewert AIMC
Pension Consultant | Branch Manager
CA Insurance License #00B00579
2005 E. Evergreen Blvd
Vancouver, WA 98661
Ph: 360-750-9626

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All other products and services provided exclusively through Advanced Corporate Planning

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