Frequently Asked Questions

Profit Sharing/Cross Testing

Questions

1. What is Cross-test profit sharing plan?

2. Who is Eligible?

Answers

1. What is Cross-test profit sharing plan?

A cross-tested profit sharing plan has the same functions and operates in the same manner as a basic profit sharing plan. The main design difference is in the way contributions are allocated. The following details the "basics" of all profit sharing plans and the last paragraph details the difference of the cross tested allocation.

top of page

2. Who is Eligible?

In order to participate in a plan an employee must meet certain requirements. One is an age and service requirement to gain "participation" in the plan. The most common used eligibility is 1 year of service and age 21. Once accomplished, the participant must work 1,000 hours in a year in order to share in that year’s allocation of contributions. A participant will always share in the allocation of earnings once he has an account balance.

top of page

Back to FAQ Index