Final answer:
New Comparability Plans are a type of defined contribution plan that allows for higher contributions for certain employees based on classifications determined by the employer, subject to IRS nondiscrimination requirements. They must pass two minimum allocation gateways to be qualified.
Step-by-step explanation:
The student's question pertains to New Comparability Plans, which are a type of retirement savings plan. These are defined contribution plans, such as 401(k)s, where employers can contribute a fixed amount to an employee's retirement account. Unlike traditional pension plans, where retirees receive a fixed payout, contributions to defined contribution plans are invested, and the returns are not directly affected by inflation.
To qualify as a New Comparability Plan, the plan must meet certain IRS requirements. Specifically, the plan must pass through two tests, known as the minimum allocation gateways, to ensure fairness in contributions across different employee groups. The New Comparability Plan allows for higher contributions for older, higher-paid employees, but not explicitly for long-time part-time employees unless they meet certain criteria. The contributions are actually based on the employee's classification as determined by the employer, not by the IRS. However, the IRS sets forth nondiscrimination requirements that these employer-determined classifications must follow to ensure the plan benefits a cross-section of employees, not just highly compensated employees.