The Weiss Group
Profit Sharing Plans (PS)
Typically, employer contributions are discretionary. The amount of employer contributions, if any, is determined annually. Although not usual, mandatory employee contributions may be required. There are several Profit Sharing variations commonly in use:
- Age Weighted
An age factor is introduced to the allocation formula, generally favoring older employees.
- New Comparability (Phase III)
Design enables employer to establish employee classifications and permits contribution amounts or percentages to vary between classes.
- IRC §401(k)-Cash or Deferred Arrangement (CODA)
A 401(k) plan is one that allows employees to contribute a portion of their salary on a pre-tax basis. The employer may make additional contributions to the plan in the form of a matching contribution or non-elective contribution.
401(k) plans are subject to special non-discrimination testing that may limit the amount that highly compensated employees may contribute to a multiple of the average contributed by non-highly compensated employees.
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