A news release said previously, ShareBuilder 401k offered a standardized advanced profit sharing plan that was limited to two tiers of allocations. The enhanced plan offers the flexibility to create as many tiers as appropriate for each business.
“Traditional profit sharing plans award the same percentage of employer contributions to each employee based on their annual salary,” said ShareBuilder 401k General Manager Stuart Robertson, in the news release. “By contrast, advanced profit sharing 401(k) plans give employers more flexibility in allocating different percentages of contributions to different levels of employees based on skill sets, age or other important criteria.”
According to the news release, ShareBuilder 401k provides small businesses with two primary ways to structure a tiered profit sharing 401(k) plan.
- The first is a “new comparability” structure that sorts employees into different groups based on income or other clearly-defined criteria of which compensation is a component. Partnerships, such as law firms, are perhaps best-suited for tiered profit sharing plans as they’re comprised of clearly-defined groups of employees.
- The second is called “age-weighted” structure which uses each participant’s age as the primary factor for allocation with older employees receiving the highest percentage.