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Therefore, a profit-sharing plan may help your company to attract, motivate, and retain valued employees.
Cross-testing provisions allow third-party administrators to calculate the contributions being made to a profit-sharing plan on a benefits basis so they can be compared to any benefits being provided under a defined benefit plan.
A profit-sharing plan is a popular compensation system aimed at stimulating the work force to top-flight effort on behalf of the company.
The arguments both for and against ESOPs and profit-sharing plans are based on the assumption that these pay devices actually provide positive feedback from company performance to nonmanagerial pay.
Data from die Bureau of Labor Statistics' (BLS) 1989 Employee Benefits Survey show that profit-sharing plans differ in many key features.
One can reasonably assume that a business that operates a profit-sharing plan would make annual contributions.
The next step in the evolution of profit-sharing plans was to create age-weighted allocation formulas.
This forced the plan sponsor who wanted to cap out at 25% of pay to offer either only a money purchase plan, or pair a 15% profit-sharing plan with a 10% money purchase plan.
An outcome of these favorable provisions is that many employers are choosing to merge their existing profit-sharing plans and MPPPs.
Noteworthy is the fact that incidental death benefit rules that normally limit the amount of pension plan assets that can be used to pay life insurance premiums may not be applicable to profit-sharing plans.
OBRA 1993 made it more difficult for such employees (from exhibit 2) to maximize their contributions not only to 401(k) plans but also to other qualified defined contribution plans such as profit-sharing plans.