Home > Retirement Plans > Plan Types > Profit Sharing

Profit Sharing Plan

A profit sharing plan is a defined contribution plan in which the employer makes discretionary contributions. A key advantage is flexibility in determining the annual contribution. The maximum annual employer deduction for contribution is 25 percent of eligible compensation. There is also a maximum individual contribution limit. The individual limits are adjusted annually for cost-of-living increases.

Types of Profit Sharing Plans include:

Cross-tested
Age-weighted
Traditional

Reasons to adopt a Profit Sharing Plan:

Flexible annual contributions
Attract and retain employees
Reduce your business taxes
Vesting schedule available

Lafayette Life Insurance Company provides services to pension plans as outlined in a separate Administrative Services Agreement, and issues life insurance and annuity products that may be used as funding options. Lafayette Life does not serve as plan administrator, nor does Lafayette Life or its representatives provide ERISA, legal or tax advice. The client’s personal or legal tax advisors should always be consulted and relied upon for advice.