Profit sharing plan

Thomas, age 55 and the owner of a computer repair shop, has come to you to establish a qualified plan. The repair shop, which employs mostly young employees, has had steady cash flows over the past few years, but Thomas foresees shaky cash flows in the future as new computer prices decline. Thomas would like to allocate as much of the plan contributions to himself as possible. He is the only employee whose compensation is in excess of $100,000. Which of the following qualified plans would you advise Thomas to establish?

A. Profit sharing plan
B. Defined benefit pension plan
C. Cash balance pension plan
D. Money purchase pension plan (integrated)


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Finance Basics: Profit sharing plan
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