The salient feature of the age-weighted profit sharing plan is the ability to skew the contribution allocation toward the older participants while retaining all the other desirable features of profit-sharing plans. This will enable greater retirement benefits for those closest to retirement.
However, the new tool IRS made available will not work as effectively as the traditionally defined benefit plan if a larger pension for the older employees is vital. Employers will find the age-weighted profit-sharing plan worth exploring. It also provides an opportunity to take a fresh look at the existing retirement program to determine if it is still suitable in meeting the company’s original objectives.
Since this article is intended to be an introduction to age-weighted plans, you should discuss its applicability and possible limitations with your benefits-plan adviser.