An age-weighted profit sharing plan uses both age and compensation as a basis for allocating employer contributions among plan participants.  All of the basic requirements that apply to regular profit sharing plans also apply to an age-weighted profit sharing plan.  An age-weighted profit sharing plan can have a discretionary contribution formula and provide the employer with flexibility over the amount of the contribution to be made each year.  Because age is a factor, this type of plan favors older employees who have fewer years than younger employees to accumulate sufficient funds for retirement.

How does an age-weighted profit sharing plan benefit older employees?

The basis for allocating employer contributions under an age-weighted profit sharing plan is determined by calculating the present value of a straight single life annuity beginning at the testing age (usually the plan’s normal retirement age, e.g. age 65).  A standard interest rate, not less than 7.5% nor more than 8.5%, compounded annually, and a straight life annuity factor that is based on the same or a different standard interest rate and on a standard mortality table must be used.

What is an example of an age weighted plan?

This favorable treatment cannot be obtained in a traditional profit sharing plan.  Each employer has a unique employee census, so please contact us for a customized quote.

Please call Hembree TPA, Inc. at (888) 486-401k or e-mail us at info@hembreetpa.com to establish a new Age Weighted Plan or review an existing Age Weighted Plan. 

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