What characterizes a New Comparability Plan?

A New Comparability Plan is characterized by its flexibility in determining how contribution levels are allocated among participants. This type of plan is specifically designed to allow employers to differentiate contribution levels based on varying factors, often tied to employee classifications such as job roles or compensation levels. This flexibility enables employers to tailor retirement benefits to attract and retain key talent, often contributing more to higher-paid or more valued employees while still offering benefits to all employees.

Unlike fixed contribution plans, where all participants receive the same contribution rate regardless of their salary or position, New Comparability Plans provide a strategic approach to allocate differing levels of contributions, which can motivate and reward employees based on their roles within the organization. This is particularly valuable for businesses that want to incentivize certain positions or groups within the workforce.

The other options do not capture the essence of a New Comparability Plan. For instance, fixed contribution rates do not allow for the flexibility intended by this plan type, and limiting contributions based solely on age does not reflect the differentiated strategy inherent in a New Comparability approach. Finally, while testing may still be required in some circumstances, it is not a defining characteristic of this type of plan.