Guideline makes the profit sharing process easy for plans to implement. Contributions are made at a company’s discretion each year, regardless of whether or not the company makes a profit. If you plan on making a profit sharing contribution, check that your plan document includes provisions for the type of profit sharing allocation formula you want (comp-to-comp vs. flat dollar).
- After year end, you can assess your company’s finances and other factors below to make a decision about whether profit sharing will be appropriate for the year.
- There is no minimum amount for a profit sharing contribution.
- Guideline doesn’t charge any extra fees for you to make a profit sharing contribution. (1)
- Contributions do not count toward the $19,000 annual deferral limit, but the total profit sharing contribution is limited to 25% of eligible compensation. Additionally, total contributions per participant cannot exceed $56,000 for 2019, or $62,000 if age 50 or over.
- Profit sharing contributions are always made as pre-tax contributions to employee 401(k) accounts.
You can also see our detailed guide to 401(k) profit sharing plans to learn more about the benefits of profit sharing.
(1) Profit sharing contributions to participant accounts that previously did not have a balance could increase the amount of monthly maintenance fees charged.