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The Business of Savings
Advanced profit sharing 401(k) aligns goals, rewards, and costs
More and more small businesses are using advanced profit sharing to save more and better manage employee contribution costs too.
Advanced profit sharing enables a company to identify unique groups in an organization and reward employees’ a different share of profits by group. For example, a legal firm may have partners, attorneys, and staff. Each can receive a different payout structure of profits as part of their 401(k). This can be a great way to align goals and compensation by each group’s contributions to your company’s success.
Advanced profit sharing can be a much more cost-effective way to provide contributions to employees than the standard profit sharing method which applies the same percent of salary across the board to all employees. Many company’s use 401(k) profit sharing plans for the simple reason that employer profit sharing contributions placed into a 401(k) plan are tax-deductible for the firm.
You may find the article Profit sharing boosts nest egg in the Connecticut Post of interest. It includes an example of how an owner can save $49,000 a year and help employees too.