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The Perfect
Plan - 2012 Plan year
APC considers “The Perfect Plan” to be a 401(k) Safe Harbor Plan with a new comparability profit sharing allocation formula. A 5% of compensation contribution allows the “Highly Compensated” employees to maximize their 401(k) voluntary cash deferral
($17,000 for 2012 plus an extra $5,500 if you are age 50 or older)
without regard to “Non-Highly Compensated” employees' deferral percentage. The new comparability allocation method uses the 5% of compensation safe harbor contribution in a way that provides the owner's group, in most cases, the ability to receive a maximum contribution of 100% of compensation or
$50,000.
In summary, “The Perfect Plan” provides a 5% contribution for non-owner participants, has the employee benefit of a 401(k) plan, and allows owners to contribute the lesser of 100% of compensation or
$50,000.
Key points:
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Greater contribution benefits to specific groups of employees. |
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No stringent discrimination testing associated with traditional 401(k) plans. |
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Popular plan with employees; they have more control over their retirement plan and flexibility regarding their participation. |
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A 5% employee contribution can be used to satisfy both the 401(k) and profit sharing discrimination
tests. |
|
Age |
Compensation |
401(k) EE Deferral Contribution |
Profit Sharing Contribution |
Total Contribution |
| Key EE |
48 |
$ 250,000 |
$ 17,000 |
$ 33,000 |
$ 50,000 |
| Employee 1 |
24 |
$ 17,000 |
At Employee's Discretion |
$ 850 |
$ 850 |
| Employee 2 |
28 |
$ 30,000 |
At Employee's Discretion |
$ 1,500 |
$ 1,500 |
| Employee 3 |
32 |
$ 40,000 |
At Employee's Discretion |
$ 2,000 |
$ 2,000 |
| - |
- |
- |
- |
- |
- |
| Totals |
- |
$ 337,000 |
$ 17,000 |
$ 37,350 |
$ 54,350 |
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