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If I Want to Establish a Money Purchase/Profit Sharing Plan, Do I Have to Establish One for All Employees of My Business?

Eligible employees have to be included in money-purchase and profit-sharing arrangements. If an employer established a Money Purchase/Profit Sharing Plan, all eligible employees must have employer contributions deposited into an account for them.

Normally an employee will agree to open an account to hold his or her employer contributions, but in some cases an employee will not want it. An employer must follow specific IRS instructions to open an account for such employees, to keep the plan compliant with ERISA and other regulations.

Eligibility requirements include being over 21 years of age and having worked at least a year for the employer as a full-time employee, where “full-time” is defined as working over 1,000 hours for the employer.

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Keywords: taxation, retirement accounts, fringe benefits, ERISA, employer contributions, eligibility requirements, full-time employees,
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