Which retirement plan would best allow Bill Dunston to maximize contributions for himself compared to his younger employees?

• A. Cross-tested profit sharing plan
• B. Salary reduction SEP plan
• C. Money purchase pension plan
• D. Age-weighted profit sharing plan

Answer: (D)

The age-weighted profit sharing plan is designed to provide larger contributions for older employees, which can be particularly beneficial for Bill Dunston, as it allows him to maximize his retirement contributions compared to his younger employees. This type of plan bases contribution amounts not just on a percentage of compensation, but also takes into account the employee’s age and years of service, which effectively favors older employees.

In this scenario, Bill would benefit from the plan's structure, as he is likely older than his younger employees and thus can have a greater percentage of his compensation allocated toward his retirement savings. This makes the age-weighted profit sharing plan an advantageous choice when seeking to increase retirement contributions for an older business owner relative to their younger staff.

Other options, such as the cross-tested profit sharing plan, may also offer some degree of adjustability based on demographics, but the specific advantage in terms of maximizing contributions for Bill due to age is more pronounced with the age-weighted plan. Salary reduction SEP plans typically focus on employee deferrals, which may not provide the same level of maximization for an older owner compared to younger employees. Meanwhile, a money purchase pension plan has fixed contribution rates, which could limit the potential for maximizing contributions based on age. Thus, the age