Profit Sharing Plans

An employer makes contributions to a profit sharing plan on a discretionary basis but is not obligated to do so
Employer contributions are tax deductible even if the company has no profits
Profit sharing contributions are credited to accounts established for each employee in a trust on the basis of each employee’s pay, age or service, or on some other objective basis that is subject to nondiscrimination tests
Profit sharing contributions can be coordinated with Social Security to give highly compensated employees a larger share of the total contribution
Contributions grow in a tax-deferred trust that is protected from creditors of the company and the employee
When an employee retires or leaves the company, his/her account can be rolled over to an IRA or the next employer’s retirement plan (if that plan accepts rollovers) to continue the tax-deferred status
Some plans allow employees to take a loan from their accounts
Some plans permit employees to withdraw from their accounts to meet a financial hardship

Profit sharing contributions can be credited on other objective criteria, subject to nondiscrimination tests to ensure that highly compensated employees do not overly benefit
An employer can create various employee groups that get different rates of profit sharing contributions, subject to nondiscrimination tests
A vesting schedule can be applied to profit sharing contributions such that an employee might only get part of the profit sharing account when he/she leaves the company
A profit sharing account can be distributed when an employee has been participating in the plan for a fixed number of years, or after his/her contributions have been in the trust for a set period of years, as long as the plan allows for these features
A stock bonus plan is similar to a profit sharing plan with the exception that distributions to employees upon termination of employment or retirement must generally be made available in employer stock

Evaluate your objectives and recommend possible plan designs
Consult with you on regulatory changes and emerging trends
Perform modeling to determine the costs of varying rates of profit sharing contributions
Perform annual nondiscrimination and coverage testing; identify corrective measures if tests fail
Assist in vendor searches to find appropriate service providers for your plan
Help with employee communications, including communication materials, employee meetings and workshops
Prepare plan documents, plan amendments, and required communications to employees
Assist in qualifying your plan with the IRS, including preparation of IRS submissions
Provide administration for your plan – daily valuation or traditional recordkeeping, process loans and distributions, including preparation of required governmental information returns related to distributions from the plan
Prepare the annual 5500 return/report required by the IRS, including any necessary interface with the plan’s independent auditors
Assist you with any IRS or DOL audit of your plan