Profit Sharing Plans

Profit Sharing Plans

TPS Group offers the expertise needed to develop and implement a Profit Sharing Plan that is tailor fit to your business. As with 401(k) plans, you can make a profit-sharing plan as simple or as complex as you want. A profit-sharing plan is available for a business of any size, and it can be established even if a company already has other retirement plans.

Profit sharing plans allow the employer to provide non-elective contributions to eligible employees.

What is a Profit Sharing Plan

A profit-sharing plan, also known as a deferred profit-sharing plan or DPSP, is a plan that gives employees a share in the profits of a company. Under this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings. This is a great way for a business to give its employees a sense of ownership in the company, but there are typically restrictions as to when and how a person can withdraw these funds without penalties. A profit-sharing plan accepts discretionary employer contributions. There is no set amount that the law requires you to contribute. If you can afford to make some amount of contributions to the plan for a particular year, you can do so. Other years, you do not need to make contributions. Also, your business does not need profits to make contributions to a profit-sharing plan.  

If you establish a profit-sharing plan, you: 

  • Can have other retirement plans
  • Can be a business of any size
  • Need to annually file a Form 5500

Profit Sharing Plans & 401 (k) Plans 

Profit Sharing plans are often paired with 401(k) Plans. A variety of profit sharing formulas are available including pro-rata, integrated, age-weighted and new comparability. We can help determine which formula is best for your organization.

Comp-To-Comp Method

One common method for determining each participant’s allocation in a profit-sharing plan is the “comp-to-comp” method. Under this method, the employer calculates the sum of all of its employees’ compensation. To determine each employee’s allocation of the employer’s contribution, you divide the employee’s compensation (employee “comp”) by the total comp. You then multiply each employee’s fraction by the amount of the employer contribution. Using this method will get you each employee’s share of the employer contribution.

Integration Method

Also known as Permitted Disparity, the Integration method is a way of recognizing compensation earned in excess of a percentage of the Taxable Wage Base (TWB). Integration is considered a uniform allocation method because it takes into consideration that the Social Security system favors employees that earn amounts under the Taxable Wage Base.

New Comparability Option

The New Comparability allocation method allows the employer to split its employees into groups and to assign different allocation percentages to each group. Classifications may be defined in a number of ways, the most common of which is by job title. Classifications may also be based on the employer’s different geographic locations, subsidiaries, employee types (i.e., union vs. non-union or hourly vs. salaried), and other similar bona fide business criteria.  This allocation method has to pass certain non-discrimination tests, however, this method usually allows maximum allocation for the owner while minimizing costs to employees.

For more information about Profit Sharing Plans in CT, Contact TPS Group Today.

Related to: Third Party Administrator, TPA, Pension Plan Design Consultant, Retirement Plan Consultant, 401k Plan Assistance, Retirement Plan Design, Actuarial Consulting, Pension Consultant, 401k Plan Consultant, Actuarial Services, Reirement Plan Integration, 401k TPA

Profit Sharing Plans FAQs

What does a company have to do after establishing a profit sharing plan?

If you establish a profit-sharing plan, you: 

  • Can have other retirement plans
  • Can be a business of any size
  • Need to annually file a Form 5500

Reviews

Highly impressed with their level of expertise and outstanding customer service.

Highly impressed with their level of expertise and outstanding customer service.

I highly recommend TPS Group and their quality third-party administration for our 403(b) plan. During our long relationship with TPS Group, we have never failed to be impressed with their level of expertise and outstanding customer service. They keep their promises and it’s easy to work with them. Having our own rep Lauren McNabb is a plus!

- Don Senecal

"Extremely Helpful to Our Business"

"Extremely Helpful to Our Business"

Malinda deserves special recognition. She is prompt, courteous, and professional. We find her to be extremely helpful to our business.

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"Wonderful To Work With"

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"Answers All Of My Questions In A Clear Manner"

Our case administrator, Susan, has been absolutely wonderful and is a joy to work with. She is very knowledgeable, patient, answers all of my questions in a clear manner, and is professional.

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Extremely Valuable to Myself and Our Company

Extremely Valuable to Myself and Our Company

Kathleen has helped me gather info and understand text so many times and is extremely valuable to myself and our company.

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Our service representative, Carol, is outstanding and very responsive and clear to requests and questions. Very professional yet pleasant.

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They are a pleasure to work with and we highly recommend their services.

They are a pleasure to work with and we highly recommend their services.

For many years we’ve relied on TPS Group’s extensive knowledge and industry expertise to keep us in compliance with state and federal regulations as well as changes in the law. Their attention to detail is just what we need to keep our business operations running smoothly. They are a pleasure to work with and we highly recommend their services.

- Dan Neal

TPS filled in the gaps within our small HR department

Working with Kim and her talented team helped us fill in the gaps within our small HR department. I strongly recommend TPS for HR tasks that don’t warrant hiring a full-time team. Thanks again Kim!

- Jake F

Knowledge and Expertise

Excellent customer service can be hard to find, but not with TPS Group! I know when I do business with Phil Coco, I can expect a quick response. I rely on his knowledge and expertise, and highly recommend TPS Group for their pension services.

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Dependable, experienced, and professional

Dependable, experienced, and professional

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