When profit sharing may not be enough, an additional strategy may include the use of new comparability. New comparability plans are a version of profit sharing that was created in the early 1990s. They have proved particularly popular with small businesses. New comparability plans were tacked on to an existing 401(k) and can boost retirement savings annually.
Traditional profit-sharing plan designs use either a flat percentage to allocate profits among participating employees, or an approach that is integrated with Social Security. This feature is intended to benefit those earning in excess of the Social Security wage base, people who are getting no retirement benefit that reflects that incremental income. By contrast, new comparability plans, which are governed by the nondiscrimination standards of the tax code’s section 401(a)(4), permit substantially higher levels of distributions to highly paid employees. Let IFG work with you on a custom strategy to combine the benefits of 401 (k)’s, profit sharing, and new comparability to maximize the effect of your plan’s contributions.