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 Profit Sharing Plans 

Benefits and Overview

Profit Sharing plans have become more popular in recent years due to the fact that employer contributions are discretionary and not mandatory. Businesses that want to install a retirement plan but have unpredictable earnings favor these plans. These plans are among the most simplistic to install and administer and offer many advantages that others do not.

• Businesses of any size may install  a profit sharing plan.
• The plans are employer funded only with discretionary employer contributions
• Employee eligibility and vesting schedule may be selected by the employer. 
• Loans and hardship withdrawals are permissible.
• Withdrawals prior to age 59 1/2 are taxed as ordinary income and in most cases are subject to a 10% penalty.
• Maximum allocation for profit sharing plan participants is 100% of compensation up to $40,000.00, whichever is less. Maximum for sole proprietors and partnerships is is limited to 13.04% of net profit or partnership income.
• This plan requires top heavy testing, non discrimination testing, annual limits and loan tracking as well as government reporting (IRS form 5500).

If your business needs call for an employer sponsored retirement plan but you are concerned about the predictability of your earnings, a profit sharing plan may be the mot suitable choice. Please contact us with additional questions that you may have concerning the installation of a profit sharing plan and its benefits.

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