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Profit Sharing Plans

This is a type of defined contribution plan that allows for great flexibility for the employer in terms of funding commitments to the plan and also allowing for a sizeable contribution/tax deduction to be made for the business.

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Invest in your employees with proft-sharing plans

Profit-sharing plans offer a flexible and effective way to invest in your employees’ future while aligning their success with your company’s growth. These employer-funded retirement plans not only provide significant tax advantages for both employers and employees but also promote long-term financial security. At ERA Admin, we specialize in designing and managing compliant, efficient profit-sharing plans tailored to meet the unique needs of your business.

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Frequently Asked Questions

What is a profit-sharing plan?

A Profit Sharing plan is a type of defined contribution plan that is sponsored by and funded by the employer.  All contributions to this type of plan are made by the employer on behalf of their employees.  These plans are flexible in terms of the amounts that can be funded, each participant can get a different amount and the funding of the plan itself is discretionary meaning there is no requirement to fund for a given year or the amounts being funded can vary from one year to the next within the plan limits.

Can a company have both a 401(k) and a profit-sharing plan?

 Yes you can have both types of plans or you can have both types of contributions available in one 401k/Profit Sharing plan. A TPA can help you determine if the best design would be to incorporate both of these contribution types into one plan or use two separate plans.

Is a profit-sharing plan the same as a 401(k)?

No, a profit-sharing plan is not the same as a 401(k), though they are both retirement savings options often offered by employers. A 401(k) allows employees to contribute a portion of their salary, often with optional employer matches. Profit-sharing plans, on the other hand, rely solely on employer contributions based on company profits and do not include employee contributions.

Is a profit-sharing plan considered a qualified plan?

Yes, a profit-sharing plan is classified as a qualified retirement plan under the Employee Retirement Income Security Act (ERISA). This status means the plan meets specific Internal Revenue Service (IRS) and Department of Labor requirements, providing tax advantages such as tax-deferred growth on contributions.