New comparability is most useful when there is a reason to allocate contributions differently and enough room in the budget to support the employee benefits required.
Start with a specific goal
Useful goals include reaching an owner contribution target at a manageable employee cost, dividing a fixed budget differently, or accommodating partners who want different amounts. “Pay less tax” alone is not enough to choose a contribution formula.
The business should first decide how much it can fund. A plan design can redistribute an employer contribution, but it does not remove the need for cash to make it.
Three profiles worth comparing
| Business profile | Why review it? | Main question |
|---|---|---|
| Owner 58; staff mostly 25–40 | Age differences may support the desired allocation | What employee funding passes testing? |
| Two owners with different savings goals | Separate allocation groups may fit better | Can both HCE rate groups work? |
| Owner 35; staff mostly 45–60 | Less favorable age relationship for the owner | Would a uniform formula be more practical? |
These are screening observations, not approval or rejection rules. Averages can hide the employee who has the greatest effect on the result. Use individual ages and compensation for the actual study.
Put a number on the opportunity
Suppose the current formula would require $22,500 for staff to deliver $45,000 to the owner. A hypothetical alternative with the same owner target and $7,500 for staff would create a $15,000 employer-funding difference before fees. That is worth investigating, but only if a tested design supports those amounts.
By contrast, if the confirmed difference is $500 and added administration costs more than that, changing the formula may offer little value. A useful screen can recommend keeping the existing plan.
What makes a screen more reliable?
- A complete census with dates of birth, compensation and employment history.
- Ownership and family relationships, including other businesses.
- Current plan provisions and all existing employer contributions.
- Each owner’s objective and the employer’s total budget.
For a first conversation, participant IDs can usually explain the economics without names. The public calculator uses hypothetical inputs; this prelaunch site does not accept real employee census uploads.
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
- Internal Revenue Code §414: related employers and special rules
Educational content updated September 18, 2026. Examples are fictional; they illustrate funding choices and do not constitute final testing or plan-specific advice.