At Butler Rogers Baskett, a New York architectural firm employing 45 people, the owners face a fairly typical problem. "With only a couple of exceptions, we're a good bit older than most of our employees," explains Jonathan Butler, a principal. "Since we have fewer years until our retirement, we want to be able to set aside in our retirement plan larger sums for the owners than we would for the rest of the staff."

Until recently, that wasn't an option. The IRS required all "qualified" -- that is, tax-sheltered -- retirement plans to meet strict antidiscrimination tests. But now there's an alternative: age-weighted profit-sharing plans. "It's a revolutionary change," says David J. McKeon, a vice-president at the New England, a Boston insurance company that administers the plans. "The IRS will now allow companies to prove nondiscrimination if they can demonstrate that all employees will wind up with the same total benefits by the time they retire."

How much more should older employees receive? The IRS's formulas and actuarial assumptions are complicated, but McKeon offers the following example: "Let's say you've got a firm with two employees: a 55-year-old owner who earns $200,000 and a 35-year-old employee earning $100,000. In a traditional plan, the owner would be limited to receiving two-thirds of any profits distributed to the plan, because his compensation amounted to two-thirds of the overall payroll. But once you work your way through the IRS's actuarial assumptions with age-weighted plans, and take into account that the 35-year-old will have 20 extra years to earn tax-free interest on this year's disbursement, you would wind up with a profit-sharing plan in which the owner could now receive about 90% of distributed profits."

With age-weighted plans, contribution levels should be recalculated each year as employees age. "But that's no big hassle," says Butler, who adds, "we also don't anticipate any big costs or complications in switching from an old-style plan." As of now, all new or redesigned profit-sharing plans to be based on the age-weighted concept will have to file Form 5300 plan descriptions with the IRS, which may result in about $1,000 in consultant fees. "It's worth it," says Butler, "if the new plans allow us to leverage the interests of our principal owners." -- Jill Andresky Fraser

For a free brochure that will help you start comparing advantages, contact David McKeon, The New England, 501 Boylston St., Boston, MA 02117, to request "The ABC Plan: The Best of Both Worlds." Then consult your benefits analyst or accountant.