Profit Sharing Plans

Profit sharing plans reward long time employees with tax-deferred growth and variable contribution options.

First Merchants offers a wide range of plans so you can get the retirement plan services you need for your business.

A money purchase plan has a fixed contribution requirement that your business chooses when your plan is started. Your business must then make that same contribution percentage each year regardless of your company's profits.

In contrast, a profit sharing plan offers more flexibility in determining annual contribution amounts. You decide how much you want to contribute each year — you can even skip years if you need to.

You can also add a 401(k) feature to your profit sharing plan.

Eligibility to Contribute 

  • As an employer you can contribute for yourself or your employees at any age.
  • Companies of any size can offer this plan.

Maximum Annual Contribution

  • Employer: Up to 25% of compensation or $50,000 in 2012.
  • Profit sharing plans allow you to vary the contribution rate each year.
  • A money purchase plan has a fixed contribution requirement that your business chooses when your plan is started. This contribution is required each year.

Tax-Deductible Contributions

Employers can deduct contributions from federal taxable income.

Taxation of Earnings and Withdrawals

Contributions and earnings are taxed as ordinary income when withdrawn.

Types of Investments

Stocks, bonds and mutual funds available. FMTC will manage your plan with your company’s objectives in mind.

Withdrawal Penalties

10% IRS early withdrawal penalty if withdrawn before age 59 ½ unless exception applies.

Exceptions:

  • Normal retirement age
  • Separation of service after five years and reaching age 55
  • Death
  • Disability
  • Substantial equal periodic payments over life expectancy
  • Rollover to an IRA
  • Qualified military reservist

Required Withdrawals

Must begin at age 70 ½.

Deadline to Set Up and Fund

  • Plan must be established by the last day of the business’ fiscal year.
  • Contributions may be made up through the business tax filing date (plus extensions).

Commissions and Fees

Varies by account