Common use of Contribution Allocation Clause in Contracts

Contribution Allocation. Allocation formula. The primary allocation formulas are in Options (a), (b), (c) and (d). Option (a) is a Nonintegrated formula and allocates the employer contribution proportionate to total compensation. Options (b), (c) and (d) are alternatives for integrated plans. Usually option (a)(2) is chosen for non integrated plans. The two-tiered formula under Option (b) maximizes the disparity permitted under the integration rules. Accordingly, the allocation in the first tier results in an equal allocation percentage based on total compensation and based on excess compensation. This equal allocation percentage may not exceed the maximum disparity percentage (5.7%, 5.4%, or 4.3%) described in he second column of the Maximum Disparity Table. After completion of the first tier allocation, the second step allocates the remaining contribution proportionate to total compensation, in the same manner as the nonintegrated formula. Under the three-tiered formula under Option (c), the plan: (i) first allocates based on total compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; (ii) then allocates based on excess compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; and (iii) completes the allocation on the basis of total compensation. The four-tier allocation under Option (d) is a hybrid of Options (b) and (c). The sole purpose of Option (d) is to use the first tier to satisfy the 3% top heavy minimum, then use a progression of three additional tiers to make maximum use of the permitted disparity rules. The second tier allocates solely on the basis of excess compensation, with a maximum allocation under the second tier equal to 3% of each participant's excess compensation. The third tier is the same as the first tier under Option (b). The fourth tier is a prorata allocation based on total compensation.

Contribution Allocation. Allocation formula. The primary allocation formulas are in Options (a), (b), (c) and (d). Option (a) is a Nonintegrated nonintegrated formula and allocates the employer contribution proportionate to total compensation. Options (b), (c) and (d) are alternatives for integrated plans. Usually option (a)(2a) is chosen for non non-integrated plans. The two-tiered formula under Option (b) maximizes the disparity permitted under the integration rules. Accordingly, the allocation in the first tier results in an equal allocation percentage based on total compensation and based on excess compensation. This equal allocation percentage may not exceed the maximum disparity percentage (5.7%, 5.4%, % or 4.3%) described in he the second column of the Maximum Disparity Table. After completion of the first tier allocation, the second step allocates the remaining contribution proportionate to total compensation, in the same manner as the nonintegrated formula. Under the three-tiered formula under of Option (c), the plan: (i) first allocates based on total compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; (ii) then allocates based on excess compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; and (iii) completes the allocation on the basis of total compensation. The four-tier tiered allocation under Option (d) is a hybrid of Options (b) and (c). The sole purpose of Option (d) is to use the first tier to satisfy the 3% top heavy minimum, then use a progression of three additional tiers to make maximum use of the permitted disparity rules. The second tier allocates solely on the basis of excess compensation, with a maximum allocation under the second tier equal to 3% of each participant's excess compensation. The third tier is the same as the first tier under Option (bc). The fourth tier is a prorata allocation based on total compensation.

Contribution Allocation. Allocation formula. The primary allocation formulas are in Options (a), (b), (c) and (d). Option (a) is a Nonintegrated formula and allocates the employer contribution proportionate to total compensation. Options (b), (c) and (d) are alternatives for integrated plans. Usually option (a)(2) is chosen for non integrated plans. The two-tiered formula under Option (b) maximizes the disparity permitted under the integration rules. Accordingly, the allocation in the first tier results in an equal allocation percentage based on total compensation and based on excess compensation. This equal allocation percentage may not exceed the maximum disparity percentage (5.7%, 5.4%, or 4.3%) described in he second column of the Maximum Disparity Table. After completion of the first tier allocation, the second step allocates the remaining contribution proportionate to total compensation, in the same manner as the nonintegrated formula. Under the three-tiered formula under Option (c), the plan: (i) first allocates based on total compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; (ii) then allocates based on excess compensation, but the allocation percentage may not exceed the maximum disparity percentage determined under the second column of the Maximum Disparity Table; and (iii) completes the allocation on the basis of total compensation. The four-tier allocation under Option (d) is a hybrid of Options (b) and (c). The sole purpose of Option (d) is to use the first tier to satisfy the 3% top heavy minimum, then use a progression of three additional tiers to make maximum use of the permitted disparity rules. The second tier allocates solely on the basis of excess compensation, with a maximum allocation under the second tier equal to 3% of each participant's excess compensation. The third tier is the same as the first tier under Option (b). The fourth tier is a prorata allocation based on total compensation.Options