Age-Weighted Profit Sharing Plan

The age-weighted plan allows employers to allocate contributions based on the age and compensation of eligible employees. Age weighted plans greatly benefit employees who are older and closer to retirement. Advantages of an age-weighted plan are its flexibility in plan design and funding. The age-weighted plan allows the company to contribute up to 25% of eligible payroll each year. Unlike the typical profit sharing plan, the total contribution to an age- weighted plan is allocated based on employee's age and compensation. The older employees will receive a higher contribution than younger employees. The individual limit is the lesser of 100% of pay or $69,000 (2024 - indexed).

Age-weighted plans should be considered when the employees targeted to receive larger allocations, are both older and more highly compensated than all other employees.

Age-weighted plans combine the flexibility of a profit sharing plan with the ability of a pension plan to skew

benefits in favor of older employees.

These plans are generally designed to be Top Heavy.