A cross-tested plan is a defined contribution plan or a defined contribution plan and cash balance plan combination which favors older, long-term employees who are closer to retirement age. Under this design, the employer contribution percent going to owners and/or highly compensated participants can be much higher than that which would be allowed under a traditional defined contribution plan (i.e. profit sharing plan). This is permitted because the contributions are tested on a projected benefits basis rather than a contribution basis (testing must pass in order to ensure that the plan does not discriminate against non-highly compensated participants). This may allow for more flexibility in contribution allocations depending on whether or not those participants you wish to benefit at a higher level are older than the remaining participants.
If you are looking to maximize the employer contributions to a select group of participants while keeping costs lower than otherwise would be permitted under a traditional plan, a cross-tested allocation method may work for you. Please contact your retirement plan administrator to discuss if this is right for you.