Qualified Retirement Plan
Highlights
Sponsor Questions
Selecting a Plan
Need a Change?
Types of Plans
Age-Based Profit Sharing Plans
An age-based profit sharing plan is a new type of tax qualified retirement plan which has two very special advantages. Age-based profit sharing plans offer much larger cotnributions for older and highly paid owners and employees and permits the year-to-year discretionary contribution flexibility.

Traditional profit sharing plan contributions are determined based upon compensation without reference to the participant's age. Age-based profit sharing plans use age and compensation in order to allocate contributions. Age-based profit sharing plans permit older and highly paid owners to receive a greater contribution than traditional profit sharing plans.

For example, an owner wants to contribute $20,000 to his age-based profit sharing plan. According to the following assumptions, the $20,000 contribution is allocated among the owner and two other employees based upon an age-based formula and also upon a traditional profit sharing plan formula. The owner would receive an additional contribution of $4,287 in the age-based plan than with the traditional profit sharing plan.

             Age    Compensation  Age-Based
Contribution
Traditional Profit
Sharing Contribution
  Difference  
Owner50$100,000$16,787$12,500$4287
Employee A40$30,000$2,228$3,750 (1,522)
Employee B30$30,000$985$3,750 (985)


Homepage Cafeteria Plans Target Benefit Pension Plan Money Purchase Plan Age Based Profit Sharing Plans Comparability Profit Sharing Plans Profit Sharing Plan 401(k) Plans