Case study
401(k) Profit Sharing
Two owners, four employees
Adding a discretionary profit sharing contribution on top of a 3% Safe Harbor lets the owners take a materially larger share of the employer dollars, while every eligible employee still receives a funded benefit.
89.5%
Total contribution to owners
$153,000
Total for owners
$18,000
Cost for employees
| Role | Age | Compensation | 401(k) | 3% Safe Harbor | Profit Sharing | Employer Total |
|---|---|---|---|---|---|---|
| Alex | 53 | $345,000 | $30,500 | $10,350 | $35,650 | $76,500 |
| Jake | 55 | $345,000 | $30,500 | $10,350 | $35,650 | $76,500 |
| Employee | 30 | $80,000 | $0 | $2,400 | $1,600 | $4,000 |
| Employee | 34 | $75,000 | $0 | $2,250 | $1,500 | $3,750 |
| Employee | 38 | $85,000 | $0 | $2,550 | $1,700 | $4,250 |
| Employee | 45 | $120,000 | $0 | $3,600 | $2,400 | $6,000 |
| Company total | $1,050,000 | $171,000 | ||||
| Total for owners | $153,000 | |||||
| Cost for employees | $18,000 |
Illustrative design based on the assumptions shown. Your own numbers will differ with age, compensation and employee group.
How this design works
- Profit sharing is 100% discretionary each year and can range from 0% to 25% of eligible compensation.
- Maximum employer deduction is 25% of total eligible payroll, or the annual IRS limit, whichever is less.
- There are several ways to allocate profit sharing, so the design can be tailored to company goals and budget.
Would this work for your company?
The right design depends on your census, your budget and what you are trying to accomplish. Send us your headcount and we will model it against your actual numbers.
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