A Profit Sharing Plan is a form of an employee benefit plan which is established and funded by a company in which the company may choose to contribute 0-25% of eligible employee compensation. The overall contribution level can change from year to year. However, if a contribution is made, it’s typically based on the same percentage of each participant’s compensation, and must generally be set apart from each participant’s account.
How do you, the Employer, benefit from Profit Sharing Plans?
* Employer contributions to a qualified plan are tax deductible for the business.
* Plan earnings are tax-deferred until withdrawal.
* The employer may be able to attract and retain high quality employees.
* Productivity can improve.
* Part-time employees may be excluded from participating.
How do your Employees benefit from Profit Sharing Plans?
* Employer contributions are tax-deferred until withdrawn from the plan.
* Earnings on plan assets are tax-deferred until withdrawal.