Products July 14, 2003

Paychex Unveils New Comparability Feature

July 14, 2003 (PLANSPONSOR.com) - Paychex, Inc. has added a new profit-sharing feature to its 401(k) offering, a "new comparability" option that targets employers who want to maximize their retirement contributions by offering them the flexibility to determine the plan's allocation method.
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This type of plan may be designed to provide higher contributions as a percentage of compensation to a particular employee or group of employees, according to the Rochester, New York-based provider.

With the new comparability feature, the business owner divides employees into separate categories or allocation groups based on specific criteria.   Company ownership, job classification, and age are among the most common criteria used to define a group.   Each group can then be assigned a discretionary distribution – typically a percentage of compensation – after the end of the plan year.  

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In order for a retirement plan to qualify for tax advantages, it must comply with IRS nondiscrimination regulations designed to ensure that highly compensated employees are not improperly favored.   New comparability plans use cross-testing to satisfy the discrimination rules.   Cross-testing is a process that determines if a profit-sharing contribution, as valued at normal retirement age, is nondiscriminatory.

In addition to Profit Sharing, Paychex’s retirement services include 401(k), 401(k) Safe Harbor, 401(k) SIMPLE, and SIMPLE IRA programs.   You can find out more at http://www.paychex.com/retirement/services.html

Founded in 1971, Paychex has more than 100 offices and serves approximately 490,000 payroll clients nationwide.

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