PensionSite ::: 401k, 412e Plans, Profit Sharing, Cash Balance Plans, and Defined Benefit Plans

Plans:

401[k] | Profit Sharing | Cash Balance | Defined Benefit | 412[e] (formerly 412[i])

Profit Sharing Plan

A Profit Sharing Plan is an employer sponsored retirement plan in which the contributions are made solely by the employer. The business owner has the flexibility to contribute and deduct between 0% and 25% of eligible participant's compensation up to a maximum of $52,000 (2014).
Contributions are allocated in one of several methods:

Same percentage of compensation for each participant
Permitted Disparity
Age-Weighted

Plan Eligibility

Sole proprietorships, partnerships, LLC’s, LLP’s or incorporated businesses,
(including subchapter S corporations), may establish a Profit Sharing plan.
All eligible employees must be allowed to participate in the Profit Sharing Plan.
Generally, an eligible employee is any employee who:

Has one year of service
Has attained age 21
Works 1,000 hours or more during a plan year
Has not bargained in good faith for pension benefits

Union employees and non-resident aliens who have no U.S source of income may
generally be EXCLUDED from coverage.

Of course, an employer can establish less restrictive eligibility requirements than the ones listed above, but not more restrictive ones.

Vesting

Vesting is the participant's ownership in the value of his or her retirement account or benefit. The vesting schedule elected by the employer applies to all participants.

If the service requirement is 1 year or less, a graded vesting schedule may be elected.
The most common graded schedule is 0% the first year and 20% per year thereafter.
For example:

Years of Service	% Vested
< 2 years	0%
2 but <3 years	20%
3 but <4 years	40%
4 but <5 years	60%
5 but <6 years	80%
6 or more years	100%

If the service requirement is greater than 1 year, vesting must be 100% immediately upon becoming a participant in the plan.

Tax Advantages

Employer contributions are tax deductible for the employer
Tax-deferred growth potential is possible -- any investment earnings
grow tax-deferred until withdrawn.

Plan Deadline

The deadline to establish a Profit Sharing Plan and deduct the contribution for the year is the last day of the fiscal year of the sponsoring business. For calendar year businesses this deadline is December 31st.

Contribution Flexibility

No annual contribution is required.

The appeal of a Profit Sharing Plan is the contribution percentage can vary each year. One may contribute between 0% and 25% of the compensation of the eligible employees, up to a dollar maximum of $52,000 (2014) per participant each year.

To contact us:
Phone: 888-412-4120 | Fax: 321-397-0409 | Bill@pensionsite.org
Primary Business Address: Post Office Box 1869, Winter Park, FL 32790

License numbers: California (0A09141) and Wisconsin (1045269)
Last Updated 12-04-15
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