A useful example shows who receives the contribution, what the employer spends, and what must be confirmed before funding.
Example A: a fixed $50,000 budget
A 58-year-old owner earns $300,000. Three NHCEs, ages 30, 35 and 40, earn $60,000, $50,000 and $40,000. The business wants to spend $50,000 on employer nonelective contributions.
| Participant | Compensation | Pro rata dollars | New comparability dollars |
|---|---|---|---|
| Owner | $300,000 | $33,333.33 | $42,500 |
| Employee A | $60,000 | $6,666.67 | $3,000 |
| Employee B | $50,000 | $5,555.56 | $2,500 |
| Employee C | $40,000 | $4,444.44 | $2,000 |
| Total | $450,000 | $50,000 | $50,000 |
The owner receives $9,166.67 more within the same budget. The illustrated owner rate is about 14.17% and employee rates are 5%. The new comparability amounts are proposed allocations, subject to testing.
Example B: a $45,000 owner target
Keep the same people and compensation, but change the question: what would it cost to provide $45,000 to the owner?
| Participant | Compensation | Pro rata | New comparability |
|---|---|---|---|
| Owner, age 58 | $300,000 | 15% / $45,000 | 15% / $45,000 |
| Employee A, age 30 | $60,000 | 15% / $9,000 | 5% / $3,000 |
| Employee B, age 35 | $50,000 | 15% / $7,500 | 5% / $2,500 |
| Employee C, age 40 | $40,000 | 15% / $6,000 | 5% / $2,000 |
| Total | $450,000 | $67,500 | $52,500 |
The owner target stays constant. The illustrated employer cost drops from $67,500 to $52,500. If 3% safe harbor nonelective contributions were already funded for everyone, the remaining funding would be $39,000: $36,000 for the owner and $3,000 for employees.
Example C: two owners with different goals
An established owner wants $45,000 and a newer owner wants $18,000. Staff compensation totals $150,000 across three younger employees. A plan permitting separate owner allocation groups could model the following.
| Participant | Age | Compensation | Proposed rate | Employer dollars |
|---|---|---|---|---|
| Owner A | 60 | $300,000 | 15% | $45,000 |
| Owner B | 48 | $200,000 | 9% | $18,000 |
| Employee A | 27 | $60,000 | 5% | $3,000 |
| Employee B | 31 | $50,000 | 5% | $2,500 |
| Employee C | 36 | $40,000 | 5% | $2,000 |
| Total | — | $650,000 | — | $70,500 |
The highest HCE rate is 15%, so the common gateway starts at 5%. Each owner’s testing rate group still needs to work. Giving the younger owner less may help match the business objective, but it is not itself proof of compliance.
Example D: the age mix offers little advantage
A 35-year-old owner and three employees ages 45, 50 and 55 have the same $450,000 total compensation as Example A. This is not the familiar older-owner/younger-staff pattern. An aggressive owner allocation may need substantially more employee funding.
| Recipient | Compensation | Uniform employer rate | Employer dollars |
|---|---|---|---|
| Owner | $300,000 | 10% | $30,000 |
| Three employees, combined | $150,000 | 10% | $15,000 |
| Total | $450,000 | 10% | $45,000 |
A uniform allocation may be the more practical choice. A provider saying “no” to one proposed design should lead to a discussion of the binding constraint and alternatives, not an assumption that the provider is wrong.
Example E: safe harbor funding is already in the plan
Return to Example B. The target allocation is $45,000 for the owner and $7,500 for three employees, or $52,500 in total employer nonelective contributions. Now assume the plan already provides a 3% safe harbor nonelective contribution on the same eligible compensation.
| Recipient group | Target total employer contribution | 3% already funded | Remaining amount |
|---|---|---|---|
| Owner | $45,000 | $9,000 | $36,000 |
| Three employees, combined | $7,500 | $4,500 | $3,000 |
| Total | $52,500 | $13,500 | $39,000 |
The economic target did not change. The funding instruction did. Contributions already allocated to participants have to be reconciled before the business funds the balance. This is why safe-harbor and profit-sharing discussions should use the same contribution ledger.
See how safe harbor contributions can fit into a New Comparability design before assuming every prior employer dollar receives the same testing treatment.
Example F: a larger staff payroll changes the economics
A 58-year-old owner earns $300,000 and wants a $45,000 employer contribution. Instead of three employees with $150,000 of compensation, assume twenty eligible employees have $1,000,000 of combined compensation.
| Allocation illustration | Owner | Employees, combined | Total employer funding |
|---|---|---|---|
| Pro rata at 15% | $45,000 | $150,000 | $195,000 |
| New Comparability illustration at 5% for employees | $45,000 | $50,000 | $95,000 |
The staff compensation base can matter as much as the owner target. The illustrated difference is $100,000 of employer funding, but the 5% row is still only an economic illustration. Aggregate payroll cannot establish that the design passes testing for twenty individual employees.
This is why a real design needs the full census rather than only the owner’s age and total payroll. Use the census checklist before treating an attractive aggregate illustration as a final allocation.
How to read all six examples
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.
There is no claim here that a displayed allocation is the minimum-cost solution or has passed every required test. These tables show the economic question to ask. A real proposal should replace the assumptions with confirmed facts, show the testing outcome, and reconcile prior contributions before giving funding instructions.
Compare the gateway math, learn how safe harbor contributions fit, or see the industry-specific illustrations.
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
Educational content updated September 27, 2026. Examples are fictional; they illustrate funding choices and do not constitute final testing or plan-specific advice.