Profit Sharing Plan/Money Purchase Plan (PSP/MPP)
A Profit-Sharing plan is a good way to reward employees for a job well done. Contributions are discretionary, so in lean years, the employer can opt out of making a contribution. However, a Money Purchase Plan does require annual employer contributions.
Generally, any employee who is at least 21 and has completed a year of service is eligible to participate in either of these plans. A Qualified trust must be established and an Annual Form 5500 must be filed. The deadline to establish a new plan is the last day of the fiscal (plan) year.
Maximum contributions: Lesser of 100% of participant’s compensation or $53,000 (this number is indexed with inflation).
Employer contributions: Discretionary if profit-sharing plan; required if money purchase plan.
Participant contributions: Not allowed.
Benefit at retirement: Account balance for PSP and an annuity purchased by account balance for MPP
When you hire Northern Financial Management, you get a credentialed experienced team with thoughtful ideas and strategies for your company. Our professionals work with you to design and implement the plan that will meet your needs for many years to come. We would welcome the opportunity to discuss your current plan.