A tool designed to assess whether a company’s retirement savings plan unfairly favors highly compensated employees over other employees. It automates calculations required by IRS regulations to ensure equitable participation and benefit distribution within the plan. For example, the program input includes employee compensation data, deferral percentages, and other plan specifics to determine if the plan meets required compliance standards.
The function is crucial for maintaining a qualified retirement plan. Compliance with these tests ensures the plan remains tax-advantaged for both the employer and employees. Failure to comply can result in penalties, loss of qualified status, and required corrections, impacting the financial security of all participants. Its development has streamlined what was once a manually intensive and error-prone process.
