What is a New Comparability Profit Sharing Plan?

New Comparability Profit Sharing Plan

New comparability profit sharing is a type of profit sharing plan that allows employers to allocate a larger percentage of the company's profits to certain employees, typically higher-paid or key employees, compared to a traditional profit sharing plan.

In a new comparability profit sharing plan, the employer groups employees into different categories based on their compensation levels, job titles, or other factors. Each group is then assigned a different percentage of the company's profits to be allocated as contributions to their retirement accounts.

For example, the employer may assign 10% of profits to a group of executives earning $200,000 or more per year, while assigning only 5% to a group of administrative staff earning less than $50,000 per year.

This type of plan can be attractive to employers who want to reward and retain their top-performing employees, while still offering some level of retirement benefits to all employees. However, it can also be complex to set up and administer, and may require the services of a financial professional or retirement plan expert.

What is a Profit Sharing Plan?


Profit Sharing Plan

A profit sharing plan is a type of retirement plan in which an employer contributes a portion of its profits to a pool of funds that is distributed among eligible employees. This type of plan is designed to incentivize employees to work towards the success of the company, as they stand to benefit from the company's profits.

In a typical profit sharing plan, the employer determines how much of the company's profits will be contributed to the plan, and then allocates that amount among eligible employees based on a predetermined formula. The formula may take into account factors such as an employee's salary or length of service with the company.

The funds contributed to the plan are typically invested, and employees may be able to choose from a selection of investment options. The funds grow tax-deferred until the employee withdraws them, typically at retirement.

Profit sharing plans can be a valuable tool for employers to attract and retain talented employees, as well as to motivate them to work towards the success of the company. For employees, profit sharing plans can provide a valuable source of retirement income, as well as a sense of ownership and investment in the success of the company.