“It’s too complex.”
“We don’t offer it for small businesses because of the cost.”
“What is it?”
The words, “New Comparability” strike fear in the hearts of many 401(k) plan providers because of its complexity.
But if your clients want to put MORE money away than the standard 401(k) limit, the New Comparability feature might be the solution.
Here’s what advisors are asking about New Comparability:
What is it and how can it help my clients?
What type of business does New Comparability best suit?
What groups can be targeted?
How does it work?
How can I explain this to my client?
How do I get started?
What is it and how can it help my clients?
Simply put, it’s a profit-sharing plan design that seeks to maximize the amount contributed to a select group (typically the business owner and other key employees) while minimizing the total cost of employee contributions.
In addition, your client may be able to deduct the entire plan contribution so long as the contribution does not exceed 25% of the total compensation of all eligible employees. That means that the contribution has a much lower after-tax “cost”!
What types of businesses does New Comparabillity best suit?
Typically businesses such as the following can best benefit from a New Comparability plan:
Contractors
Engineers
Advertising agencies
Dentists
Architects
Doctors
Financial planners
Pharmacists
Veterinary Clinics
What groups can be targeted?
New Comparability allows the employer to divide his or her employees into two or more groups and provide a different level of contribution to each group in the 401(k) plan.
For instance, a plan can be divided into the following groups:
Group 1: Doctors and family members of doctors
Group 2: All other employees
OR
Group 1: Owner and family members of owners
Group 2: Sales force
Group 3: All other employees
How does it work?
Click here to see a sample New Comparability scenario
How can I explain this to my client?
You don't have to! Use us as your New Comparability and 401(k) experts. Depending on your needs, we are happy to sit in on your meeting via a conference call for support, provide a customized New Comparability proposal for your client or give you more detailed information that will help you explain the feature.
How do I get started?
Simply call us at 877.775.401k or e-mail us at advisors@theonline401k.com to talk to us about putting together a customized New Comparability proposal for your client today.
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