Profit Sharing Plan (PSP)

Profit sharing plans can be a powerful tool in promoting financial security in retirement. They are a valuable option for businesses considering a retirement plan, providing benefits to employees and their employers.

A profit sharing plan is a type of plan that gives employers flexibility in designing key features. It allows the employer to choose how much to contribute to the plan (out of profits or otherwise) each year, including making no contribution for a year. Employers start a profit sharing plan for additional reasons:

  • A well-designed profit sharing plan can help attract and keep talented employees.
  • A profit sharing plan benefits a mix of rank-and-file employees and owners/managers.
  • The money contributed may grow through investments, money market funds, savings accounts, and other insurance investment vehicles.
  • Contributions and earnings generally are not taxed by the Federal Government or by most state governments until they are distributed.
  • A profit sharing plan may allow participants to take their benefits with them when they leave the company, easing administrative responsibilities.

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