Profit Sharing Plans FAQs
The Profit Sharing plan is one of the common types of defined contribution plans. The plan permits employers to make tax deductible contributions on behalf of themselves and their employees; employee salary deferrals are not allowed.
This plan is a good option for businesses wanting more features and flexibility in the retirement benefit they provide for their employees. For example, the profit sharing plan allows for loans and graded vesting, two features not available with SEP IRAs.
What do we do for your plan?
Our services include:
- Trustee services (including IRS Form 1099-R)
- IRS approved prototype documents
- Notice of required minimum distributions and free calculation upon request
- Toll-free number for customer service
- Optional Form 5500 preparation and other compliance services
What are some of the benefits of offering this plan?
- Retirement plans are an important part of the benefit package to attract and retain good employees. They can help improve employee productivity and morale.
- The costs of maintaining the plans are tax deductible as business expenses.
- The full amount of the annual contribution (up to legal limits) is tax deductible on the employer's federal income tax return.
Caution: A SEP-IRA established with the IRS model form cannot be paired with a defined contribution plan.
Note: This information should not be construed as providing individual tax or legal advice. Please consult with your own tax advisor or attorney regarding your individual situation.
