Cartoon about a retirement
Cross-Tested Plans
October 1, 2021 | posted in: Accountants | by Frye Retirement
Help Your Older and More Highly Compensated Clients Save On Taxes AND Save More For Retirement – But The Time To Act Is Now!
Many small business owners start 401(k) plans to benefit their hard-working employees. Sometimes, however, a basic 401(k) plan which treats every employee the same – including the owner – can make it challenging for the owner to stay on track for retirement. A cross-tested plan allows business owners to allocate a higher contribution rate to the owners and other highly compensated employees while also providing a benefit to the rest of the employees. Here’s an example of how it might work:
Cross-testing reveals the owners can fund much greater employer contributions to their accounts – without changing their contributions to other employees.
If you would like to convert your clients’ plans to a cross-tested plan, please contact us immediately so we can start the process by the November deadline.
