How long have you searched for a retirement plan that was designed specifically for highly compensated dentists? A New Comparability Profit Sharing Plan is one of the newest plans in the qualified plan arena. Combining the flexibility of a profit sharing plan with the ability of a defined benefit pension plan, the new comparability plan allocates a larger percentage of the total contribution only to the dentist, or a select class of employees.

A new comparability plan is a type of qualified defined contribution plan. It is usually a profit-sharing plan that is similar to an age-weighted plan in that both types of plans allow a dental practice to maximize the plan contributions to the older, higher-paid dentists while minimizing allocations to the accounts of younger employees. New comparability plans, however, take this one step further by using specific employee classifications (rather than strictly age) in the design of the contribution levels for various participants. As the dentist, you can provide yourself  a higher percentage of the plan contribution than you could under a traditional profit-sharing plan or even an age-weighted plan.

Prerequisites

While just about any dental practice can set up a new comparability plan, it is most ideal for practices whose dentists:

• Are older, on average, than their other employees
• Want the contribution flexibility of a profit-sharing plan
• Want the biggest possible share of the plan contribution allocated to their accounts

Key Strengths

• You can maximize your contributions for yourself
• Your contributions are flexible
• Your contributions are tax-deductible up to 25 percent of the payroll of plan participants
• Your contributions are tax-deferred for your employees and earnings accrue tax deferred

Key Tradeoffs

• Annual additions (contributions plus forfeitures) are limited to the lesser of 100 percent of each participant's compensation or $49,000 (in 2010)
• Your plan is subject to top-heavy plan rules, which may require additional employer contributions for non-key employees

How Is It Implemented?

A number of complex rules govern new comparability plans. Consequently, you will need a pension specialist to help you develop and maintain a plan. In setting up and maintaining the plan, you will need to:

• Determine the plan features most appropriate for your dental practice
• Choose the plan trustee
• Choose the plan administrator
• Submit the plan to the Internal Revenue Service (IRS) for approval or use a preapproved "prototype" plan
• Adopt the plan during the year in which it is to be effective
• Provide a copy of the summary plan description to all eligible employees
• File the appropriate annual report with the IRS