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Profit Sharing

Ascensus Consulting provides administration, compliance, and consulting services for profit sharing plans. Despite this plan’s name, it is not directly tied to the profits of the employer, although having extra cash flow makes it easier for an employer to provide a profit sharing contribution to employees.

In a profit sharing plan, an employer 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 Multi-fund Open Architecture 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. 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 established by the Department of Labor. 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 Code and the Department of Labor requirements of the 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.

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