Profit-sharing could mean more than $16,000 annually in additional, individual tax savings.
Profit-sharing can be found in most company 401(k) plans and is designed to increase tax efficiency for both owners and highly compensated employees. It gives employees a share of company profits based on an ERISA approved formula. Profit-sharing is a great way for a business to allow employees to share in its success. And to attract and maintain a talented, loyal workforce.
CONTRIBUTION LIMITS FOR 2021
The maximum contribution amount is the lesser of 100% of compensation or $58,000 ($64,500 including catch-up contributions).
EMPLOYER CONTRIBUTIONS ARE DISCRETIONARY
This means a company can decide from year to year how much to contribute (or whether to contribute at all) to an employee's plan.
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