Under IRS rules, all related entities that are part of a controlled group must be treated as a single entity for the purposes of employee benefits. This requirement also applies to profit sharing contributions, which are pre-tax contributions employers can make to employees’ retirement accounts after the end of the year.
If your company is part of a controlled group, and you are interested in making a profit sharing contribution, Guideline will need to calculate and process the profit sharing allocation for all eligible employees across all plans within your controlled group.
How to initiate a profit sharing contribution
To initiate this request, please send an email or form submission to our Sponsor Support team with the following information:
Subject line “Controlled group profit sharing.”
Ensure the trustee for each plan is included on the email if there is a different trustee listed for one plan versus another in the group.
Include the Guideline account IDs (located in the dropdown menu on the top right corner of your administrator dashboard) for each plan in your controlled group for account verification.
Indicate the allocation amount you’d like to contribute based on your plan's profit sharing type. If you're unsure what type of profit sharing formula your plan has, you can view it in the Settings page of your administrator dashboard. You can learn more about the profit sharing formulas here.
Pro-rata: This approach allocates the profit share based on employees’ relative salaries. Please provide:
Percent to be allocated per employee based on their relative salaries (preferred), or
The total dollar amount of the overall profit sharing contribution you’d like to make
Flat dollar: With this formula, every employee receives the same contribution amount. Please provide either:
The dollar amount to be allocated per employee, or
The total dollar amount of the overall profit sharing contribution you’d like to make
New comparability: A new comparability profit sharing allocation allows a greater disparity of contributions between different groups of employees. Please select one of the following options to calculate the profit sharing allocation:
Maximize contributions for the oldest owner
Maximize contributions for all owners (older owners will receive a higher contribution)
Maximize contributions for specific owner(s) (not weighted by age)
Give the same amount to all owners
Indicate the preferred withdrawal date (please allow at least 2 weeks from the date of your request to ensure ample time to generate a projection for your review and approval).
Once we have the above information, a client relationship manager will begin drafting a projection of the allocations generated and circle back to confirm once it is available for your review for approval. Please note, your profit sharing contribution will not be processed until it is approved by all plan trustees. After we receive approval, we will move ahead with processing the allocations on your requested withdrawal date.