Pro rata allocation

Definition

Allocation method where allocations are made to participants as a percentage of compensation, with each participant receiving the same percentage or being charged the same percentage. For instance,  if each employee receives 15% of eligible compensation as a contribution to the plan, contributions have been allocated on a pro-rata  basis.

Referring Cite

Plan document

Additional Helpful Information

• Revenue Ruling 2004-10, which addresses whether a defined contribution plan under which the accounts of former employees are charged a pro rata share of the plan’s reasonable administrative expenses, but the accounts of current employees are not charged those expenses, fail to satisfy the requirements of § 411(a)(11) of the Internal

 

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