PROFIT SHARING PLANS PROVIDE FLEXIBLILTY
Traditional Profit Sharing Plan
A Traditional Profit Sharing Plan is a qualified retirement plan, established and funded entirely by employer contributions. The overall contribution level may vary from year to year. The contribution must generally be allocated to each participant's account in a uniform fashion with each participant receiving the same percentage of compensation. Because of this uniform allocation requirement, many plan sponsors opt for a New Comparability Profit Sharing Plan design that affords some flexibility in determining how much each employee will receive of the profit sharing contribution. Learn more.
New Comparability Profit Sharing Plan
A New Comparability Profit Sharing Plan is generally a profit sharing plan in which the contribution percentage formula for one category of participants is greater than the contribution percentage formula for other categories of participants. Unlike a Traditional Profit Sharing Plan, a New Comparability Plan allows employers some flexibility in determining what percentage of pay each participant will receive of the profit sharing contribution. Employers often use this flexibility to target a certain employee (business owner) or group of employees for higher plan contributions. Learn more.