Cross Testing: Creating New Tiers After Year-End (Posted February 8, 2004) Technical Tip 114: The following question and answer were from the IRS Q&A Session at the 2002 ASPPA Annual Conference: A calendar year profit sharing plan allocates its contribution between two classes of employees: HCEs and NHCEs. The plan requires that an employee be credited with 1,000 hours of service to qualify for a share of the allocation. The contribution to each class is allocated pro rata on compensation within the class. A preliminary allocation is prepared for the 2002 year. It is determined that a contribution of 5% to the NHCEs will be sufficient to support a maximum allocation to the HCEs. Before the end of the year, but after all participants have met the allocation requirements, the sponsor decides to create a third allocation class: NHCEs who have at least six years of service. He wants to allocate a contribution of 10% of compensation to these NHCEs, but still maintain the original 5% contribution to the other NHCEs who have less than six years of service. Is this permissible? Response: The Service would probably consider this a 411(d)(6) protection issue. They could set up a separate plan and accomplish their objective. They might also find that a -11(g) amendment would meet their requirements. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.