Professional-services firms are not automatically good candidates. When the owner is younger than the staff, a uniform allocation deserves serious consideration.
The business and its goal
A 35-year-old consultant owns a firm with three experienced employees ages 45, 50 and 55. The owner earns $300,000, and staff compensation totals $150,000. The employer has a $45,000 budget for nonelective contributions. Here is a straightforward pro rata benchmark.
What the allocation could look like
| Participant | Age | Compensation | Rate | Employer dollars |
|---|---|---|---|---|
| Firm owner | 35 | $300,000 | 10% | $30,000 |
| Consultant A | 45 | $60,000 | 10% | $6,000 |
| Consultant B | 50 | $50,000 | 10% | $5,000 |
| Operations lead | 55 | $40,000 | 10% | $4,000 |
| Total | — | $450,000 | — | $45,000 |
A uniform 10% formula provides $30,000 for the owner and $15,000 for staff, exactly using the $45,000 budget. This example intentionally shows a simple alternative; it is not presented as a new comparability allocation.
Illustration assumptions: A standalone defined contribution plan; all people shown are eligible for the illustrated employer contribution; owners and other specifically identified HCEs are highly compensated employees; remaining staff are non-highly compensated employees (NHCEs). Compensation is eligible plan compensation. Employer dollars include any safe harbor nonelective contribution; employee deferrals, catch-ups, matching contributions and fees are excluded unless stated. These are fictional planning examples, not completed nondiscrimination tests. Final allocations may differ.
What would a more owner-focused proposal require?
A preliminary request for $37,500 for the owner and $7,500 for staff would also total $45,000. But the owner is younger than every employee, so the usual age-based rationale for a much higher owner rate is absent. Meeting a gateway alone would not establish that this alternative works.
The provider can evaluate whether any permitted alternative offers enough benefit to justify the effort. A recommendation to keep the uniform allocation may be the most useful result of that review.
What could change the result?
Do not screen on industry alone or assume contractor labels settle employee status. Confirm the employee population, service relationships and entity structure. Compare the cost of additional administration with any improvement supported by testing.
Ages and rates in these tables illustrate the design conversation; they do not certify a passing allocation. Actual testing uses individual data, the plan’s provisions and applicable assumptions. Contributions already funded must be reconciled before any remaining amount is instructed.
What to ask your provider
Ask for the uniform allocation as a benchmark, then request the actual tested improvement within the same budget. If the improvement is small, simplicity may be worth more to the business.
Bring the complete census and current plan documents. For the basic comparison, read new comparability versus pro rata; for the minimum-contribution calculation, see the gateway guide.
Explore the next step
Try the free scenario calculator with hypothetical inputs, or compare more allocation examples. The methodology guide explains what the calculator does and does not test.
Sources & further reading
- Treasury Regulation §1.401(a)(4)-8: cross-testing and the gateway
- Treasury Regulation §1.401(a)(4)-2: contributions and rate groups
- IRS Notice 2025-67: 2026 retirement plan limits
- Internal Revenue Code §414: related employers and special rules
- Treasury Regulation §1.401(k)-3: safe harbor requirements
Educational content updated September 27, 2026. Examples are fictional; they illustrate funding choices and do not constitute final testing or plan-specific advice.