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A Profit Sharing Plan often serves as a company’s key supplemental retirement vehicle. In the good years when businesses have the extra resources to fund retirement savings, the Profit Sharing Plan provides the flexibility that small to medium business owners want and desire as a key component of their overall wealth accumulation strategy.
The Profit Sharing Plan is funded by the employer on a discretionary basis -- only when the company has sufficient income or assets. It is best suited for employers who do not want to make mandatory annual retirement contributions. The profit-sharing plan is ideal for the business that wants to reward long-term employees by using vesting schedules. Businesses with part-time, seasonal, or terminated employees can establish plans to exclude employees who work less than 1,000 hours. Union employees can also be excluded unless participation is negotiated under a collective bargaining agreement.
Eligibility: Employers can provide that employees must have 1 year of employment before they are eligible to participate. Upon participation, employees are then subject to a Vesting Schedule. A 2 year waiting option is also available, however, under this alternative employees are 100% vested when they start to participate.
Vesting Schedules: 3 year cliff schedule, or a 6 year graded schedule for top-heavy plans. Upon termination of employment, non-vested portions are forfeited.
Contact Mr. Davies for a proposal and illustration for your business.