In any given year, a business can elect to make a profit sharing contribution to its employees.
If your business intends to make a profit sharing contribution for the 2020 plan year, you need to make the request before your business tax filing deadline. Guideline will start sending out the Profit Sharing task in late February and a link will be visible in your Plan sponsor dashboard. Requests will be processed from March through October, based on your filing deadline (extension dates in parentheses).
- Partnership, LLC partnership and S-Corporation - March 15th (Sept 15th)
- C-corporation & Sole proprietor - April 15th (October 15th)
- Tax-exempt organization - May 15th (November 15th)
Safe Harbor 401(k) plans generally automatically satisfy Top Heavy requirements, except for plan years in which the employer makes additional discretionary contributions (such as profit sharing contributions) in addition to Safe Harbor contributions. If the plan is determined to be Top Heavy for the year, then the plan may be required to make a Top Heavy contribution which is the lesser of the following:
- 3% of each Non-Key Employee’s compensation , or
- The highest percentage contributed by or on behalf of any Key Employee. In an instance where no key employee gets any contribution, then the Top-Heavy Minimum Contribution would be zero percent.
If Non-Key Employees receive matching, profit sharing, or qualified non-elective contributions (QNECs), these contributions can count toward satisfying the Top-Heavy Minimum Contribution. If you have not received the profit sharing notice, your plan might be at risk to be top heavy if there were to be a Top-Heavy Minimum Contribution. Please email us with your intended profit sharing amounts so we may review the risk.