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Age Weighted Plans
Plan Year 2012 |
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Age-weighted
profit sharing plans resemble traditional
profit sharing plans with one important
exception: the way the employer contribution
is allocated to each participant's account.
Traditional
profit sharing plans usually allocate the
employer contribution in proportion to
compensation. Age-weighted plans use
compensation and the participant's age when
allocation the contribution. This formula
results in a significantly larger allocation
of the contribution to employees who are
closer to retirement age. Age-weighted profit
sharing plans combine the flexibility of a
profit sharing plan with the ability of a
pension plan to skew benefits in favor of
older employees.
The "Economic
Growth and Tax Reconciliation Act of 2001",
signed into law on June 7, 2001, will have a
substantial affect of qualified plans. Listed
below is information provided for the 2004
plan year, using the limits put into place by
the new tax law.
The 2001 law
provided a higher compensation level and
higher contribution percentage (25% of
compensation rather than 15%).) In this
example, we have used a contribution of
$131,425, which is the amount needed in order
for Officer/Shareholder #1 to receive a $50,000 contribution in
an Age Weighted Plan. Note the difference in
the amount required to be funded in the Traditional and
Integrated Plans in order for Officer/Shareholder #1 to
receive the full $50,000. |
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Plan Comparative Analysis – 2012 Year |
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|
Name |
Age |
Income |
Traditional |
Integrated |
Age Weighted |
New Comp |
SEP |
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Officer/Shareholder # 1 |
58 |
$250,000.00 |
$50,000.00 |
$50,000.00 |
$50,000.00 |
$50,000.00 |
$50,000.00 |
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Officer/Shareholder # 2 |
41 |
$250,000.00 |
$50,000.00 |
$50,000.00 |
$33,840.35 |
$50,000.00 |
$50,000.00 |
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Group A |
|
$500,000.00 |
$100,000.00 |
$100,000.00 |
$83,840.35 |
$100,000.00 |
$100,000.00 |
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Manager |
46 |
$89,774.00 |
$17,954.80 |
$15,224.77 |
$18,272.33 |
$7,181.92 |
$17,954.80 |
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Group B |
|
$89,774.00 |
$17,954.80 |
$15,224.77 |
$18,272.33 |
$7,181.92 |
$17,954.80 |
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Staff # 1 |
30 |
$17,854.00 |
$3,570.80 |
$3,027.86 |
$
985.15 |
$
892.70 |
$3,570.80 |
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Staff # 2 |
25 |
$31,287.00 |
$6,257.40 |
$5,305.96 |
$1,148.11 |
$1,564.35 |
$6,257.40 |
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Staff # 3 |
41 |
$31,399.00 |
$6,279.80 |
$5,324.96 |
$4,250.21 |
$1,569.95 |
$6,279.80 |
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Staff # 4 |
46 |
$30,026.00 |
$6,005.20 |
$5,092.11 |
$6,111.40 |
$1,501.30 |
$6,005.20 |
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Staff # 5 |
36 |
$39,997.00 |
$7,999.40 |
$6,783.09 |
$3,600.59 |
$1,999.85 |
$7,999.40 |
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Staff # 6 |
33 |
$31,622.00 |
$6,324.40 |
$5,362.78 |
$2,228.67 |
$1,581.10 |
$6,324.40 |
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Staff #
7 |
42 |
$39,765.00 |
$7,953.00 |
$6,743.75 |
$5,840.17 |
$1,988.25 |
$7,953.00 |
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Staff #
8 |
44 |
$22,008.00 |
$4,401.60 |
$3,732.34 |
$3,805.09 |
$1,100.40 |
$4,401.60 |
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Staff # 9 |
26 |
$33,718.00 |
$6,743.60 |
$5,718.24 |
$1,342.49 |
$1,685.90 |
$6,743.60 |
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Group C |
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$277,676.00 |
$55,535.20 |
$47,091.07 |
$29,311.88 |
$13,883.80 |
$55,535.20 |
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Total |
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$867,450.00 |
$173,490.00 |
$162,315.85 |
$131,424.56 |
$121,065.75 |
$173,490.00 |
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Group A % |
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57.64% |
57.64% |
61,61% |
63.79% |
82.60% |
57.64% |
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Group B % |
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10.35% |
10.35% |
9.38% |
13.90% |
5.93% |
10.35% |
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Group C % |
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32.01% |
32.01% |
29.01% |
22.30% |
11.47% |
32.01% |
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01/03/2012 |