Cross-Tested 401(k) Plan

What is a Cross-Tested 401(k) Plan?

A Cross-Tested plan, or often referred to as a New Comparability plan, is a profit-sharing retirement plan in which the employees are divided into groups. Each group receives an employer contribution that represents a different percentage of compensation. The plan works particularly well where the owners of a business (each of whom is almost always found to be a “highly compensated employee” for purposes of the qualified retirement plan nondiscrimination rules) are different ages, thus precluding the adoption of an age-weighted type of profit-sharing plan.

A cross tested plan is ideal for a company where the goal is to maximize employer contributions to certain groups of people. Whether that be a group of owners or a specific division a cross tested plan can be an ideal plan design to maximize pre-tax contributions.

Maximum Deferral Amount (employee contributions):

  • The IRS Limit: $20,500 for 2022

Catch Up Contribution (for participants over age 50):

  • The IRS Limit: $6,500 for 2022; participants over age 50 may contribute $27,000 for 2022 ($20,500 + $6,500)

Eligibility Requirements (optional):

  • You may require an employee complete 12 consecutive months of employment with at least 1000 hours of service during those 12 months (one year of service).
  • You may choose to exclude employees who are under age 21.

Entry Dates (optional):

  • Monthly, quarterly or semi-annually.

Employer Contributions:

  • Cross-tested 401(k) plans combine Safe Harbor 401(k) contributions with discretionary contributions. Using this combination of employer contributions, cross-tested plans are able to receive a “free pass” on the ADP test and generally satisfy any Top-Heavy testing requirements. This further allows for owners to receive the IRS’ Annual Additions Limit ($61,000 for 2022, plus catch-up of $6,500 making it $67,500 for those over 50 years of age).
  • Safe Harbor 401(k) contributions:
    • Matching formula: At least 100% of the first 3% of salary deferred plus 50% of the next 2% of salary deferred. For example: An employee that contributes 5% of their salary of more would receive a match equal to 4% of salary.
    • Profit-Sharing Formula: At least 3% of compensation
  • Discretionary contributions: Your 401k provider will work with you to determine the optimal strategy with regards to employer contributions.  This could be in the form of an additional discretionary profit-sharing contribution or matching contributions.


  • Safe Harbor 401(k) contributions are immediately 100% vested.
  • Discretionary contributions may be subject to a vesting schedule of up to 6 years.


  • Loans and Hardship withdrawals are permitted.
  • Minimum loan amount is $1,000.
  • Maximum loan amount is one half the vested account balance but no more than $50,000.

Are you ready to get started?

Click below, or give us a call at 1-888-934-4015. We’ll send you a proposal on all of the services we offer and how low it can actually cost to run your 401(k) plan with us.

Have Questions?

If you need to speak to us about a general query fill in the form below and we will call you back within the same working day.

Are you ready to get started?

Let us send you a proposal with all of the services we offer and show you the value provided with our 401(k) plan.