A smaller company with 75 employees wishes to establish a retirement plan. Some of the employees are highly paid, but most are part-time low wage earners. The company would like to maximize contributions for the highly-paid employees to keep these talented individuals. The company has erratic cash flow but is profitable overall. What type of retirement plan would be the best for the company

Question

Marble

Business

8 February, 17:37

A smaller company with 75 employees wishes to establish a retirement plan. Some of the employees are highly paid, but most are part-time low wage earners. The company would like to maximize contributions for the highly-paid employees to keep these talented individuals. The company has erratic cash flow but is profitable overall. What type of retirement plan would be the best for the company

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Answers (1)

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Muhammad Norton · Answer 1

The correct answer is: Profit Sharing Plan.

Explanation:

A Profit Sharing Plan is a type of retirement plan where employers provide workers contributions based on their income and company's earnings. A Profit Sharing Plan is suitable for companies with changing earnings because in case the firm does not have revenues given a period, the firms are not obligated to provide contributions to its employees.

The maximum contribution is higher relative to other retirement plans - 25% for the Profit Sharing Plan. Top managers would be benefited since they receive higher wages.