Profit Sharing
Baden Retirement Plan Services is an independent third party administrator (TPA) of profit sharing plans. Despite this plan's name, it is not directly tied to the profits of the employer (plan sponsor) although having extra cash flow makes it easier for a plan sponsor to provide a profit sharing contribution to employees. A profit sharing plan is an IRA-based account in which an employer (plan sponsor) sets up and contributes to retirement savings accounts for the company's employees. Our services for profit sharing plans include, among others:
- Profit Sharing Plan Documents
- Profit Sharing Plan Administration
- Profit Sharing Plan Compliance Testing
- Profit Sharing Plan Consultation
- Profit Sharing Plan Daily Valuation and Recordkeeping
- Profit Sharing Plan Form 5500
- Profit Sharing Plan Design
Profit Sharing Plan
- Typical number of employees in the plan: Unlimited number of eligible employees
- Features: Only the employer contributes to a profit sharing plan. Employees do not make contributions to a profit sharing plan. An employer's contributions are discretionary but if a contribution is made, it must be calculated to ensure that all employees are receiving a fair benefit. A calculation called the comp-to-comp method can be used to help ensure that the profit sharing plan does not discriminate in favor of highly compensated employees (HCEs). In some cases, installing an integrated profit sharing plan can allow for some HCEs to benefit at a higher level than non-highly compensated employees. However, in years where a small overall contribution is made, there may not be enough money for highly paid employees to receive a higher contribution than others. Whether a company sponsors a profit sharing plan or an integrated profit sharing plan, contribution limits are subject to cost of living adjustments (COLAs) established by the Department of Labor (DOL). A profit sharing plan can be combined with other retirement plans.
Similar to a 401(k) plan, a profit sharing plan must comply with applicable Internal Revenue codes and the Department of Labor's Employee Retirement Income Security Act of 1974 (ERISA), which is the federal law that sets minimum standards for operating most voluntarily established tax qualified retirement plans to provide protection for individuals who participate in the plans.
For more information, contact Tom Ackmann at (260) 969-2677 or use our Contact Us form to e-mail your inquiry