Profit Sharing Plans. Profit Sharing Plans offer both design flexibility and discretion for making contributions. Employer contributions are flexible and may be allocated in a number of ways. The employer may make a discretionary contribution each year, which can be subject to a vesting schedule.
Cross-Tested Plans. These plans use allocation methods which allow the employer to select classes of employees that provide for different contribution allocation levels for each group. If the nondiscrimination tests are met, the employer can allocate a larger proportionate share of the company’s contribution to specific employees the employer wishes to benefit the most.
401(k) Plans. A 401(k) Plan is a type of profit sharing plan that includes an elective salary deferral provision. The employer typically has the ability to make a matching contribution that is tied to the elective salary deferral, as well as a profit sharing contribution which is allocated to all eligible participants. Employees can make tax-deferred contributions or after-tax Roth contributions.
Safe Harbor Plan. A type of 401(k) plan under which an employer is not required to perform nondiscrimination testing of elective contributions or matching contributions by meeting certain employer contribution requirements and provide for 100 (%) percent immediate vesting of these contributions.
Simple Plans. A 401(k) plan for companies with less than 100 employees under which an eligible employer no longer needs to be concerned with discrimination testing or with top-heavy rules. However, there are levels of employer contributions, lower elective deferral limit and 100 (%) percent vesting of employer contributions.