AGE-BASED PROFIT-SHARING PLAN
01.Core Concepts
• Example (uses age and compensation to allocate the plan contributions) • Dr Deja (“DD”) (age 55) hires Nurse Niles (“NN”) (age 30) • Adopts an age-based profit-sharing plan for the two employees (DD & NN) • Compensation – DD - $280,000 & NN - $30,000 • Factors for allocation: • DD – (0.4423) x $280,000 = 123,840 98.625% • NN – (0.0575) x $30,000 = 1,726 1.375% • Contributions (discretionary 10%) – total of $31,000 • DD – $30,574 • NN – $426 • Increased to $900 due to top-heavy requirements