Profit-sharing is a feature that can be added to a normal 401(k) plan to help your employees save for retirement.
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Employers can decide annually whether to contribute to employee plans depending on their company revenue that year. Employees can receive a profit-sharing contribution from employers even if they do not make a contribution themselves.
Employers like profit-sharing plans because:
Employees like profit-sharing because:
No matter which formula is used, all 401(k) profit-sharing plans are subject to the following IRS rules:
Employers can choose from a number of profit-sharing formulas:
In most cases, profit shares are offered in conjunction with a 401(k), which allows employees to put their own money into the plan–up to $30,500 a year with catch-up contributions–while employers continue contributing up to the $69,000 maximum. Combining both features creates flexibility for employee bonus structures while allowing employees and employers to save more for the future.
Starting a new 401(k) plan with profit-sharing requires a system that tracks contributions, investments, distributions, and IRS compliance. Ongoing administrative upkeep is typically outsourced to a Third-Party Administrator such as Ubiquity.
Setting up a profit-sharing plan as part of an existing 401(k) can be done by simply adding an amendment. As a 401(k) plan administrator, Ubiquity consults with clients to make sure the profit share aligns with business goals.
Profit-sharing is a generous incentive to encourage workers of all compensation levels to continue providing their best efforts while allowing maximum flexibility for employers to keep costs reasonable. Contact Ubiquity to learn more about profit-sharing benefits.
If you are a small business owner and need a retirement plan for yourself and your company, only Ubiquity offers flat-fee plans, plus expert guidance along the way.
We will fully customize your plan to meet the specific needs of your small business.
Setting up a 401(k) can be complicated. Only Ubiquity gives small business owners access to retirement experts in addition to industry-leading, low, flat fees. Each sales expert has over a decade of experience assisting business owners in 401(k) plan design. Take advantage of this free benefit.
Profit-sharing is generally a worthwhile benefit, though it may not be right for every company due to the following factors:
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