Which Plan is Right For You?
Profit Sharing Plans
Currently the Profit Sharing plan is one the most popular retirement plans. A profit sharing plan offers the greatest flexibility and variety of options, including the ability to add a 401(k) salary deferral provision ( i.e., a 401(k) Plan).
In a profit sharing plan, the employer may make tax-deductible contributions each year for their employees (owners are also considered employees). Contributions to profit sharing plans are not required from year to year, and the amount of the contribution is generally at the discretion of the employer. Each participant shares in the allocation of the contribution based on a formula that is defined by the plan’s pre-established rules (the plan document). A participant’s share of the contribution is based on his or her salary. The plan may also take into account other factors, such as the age of the participant, when allocating the contribution.
Profit sharing plans have an annual per-participant contribution limit of $53,000. The amount of the contribution that is tax-deductible for the employer is limited to 25% of the gross annual salaries of all plan participants.
Security Administrators, Inc. • 105 Court St. • Binghamton, NY 13901 • 1-877-SAI-BING (724-2464)