Are profits required before a profit sharing plan can be established?
No. Taxable employers are not required to have taxable earnings prior to establishment of a profit sharing plan. Many employers use these plan arrangements as a means to shelter earnings and reward employees. Although there are non-discrimination rules, it may not be necessary to cover all employees under the plan. Restrictions can be established based on age, years of service, full or part-time status, and employment. What is a Cafeteria Plan? A cafeteria plan also known as flexible benefits plan is a health and welfare benefit plan that gives employees of all types of employers the opportunity to defer pay to assist in payment of insurance premiums, non-reimbursable medical/dental expenses, and dependent care cost on a tax-free basis. All funds deferred are used to meet current year needs. Employers and employees alike reap the advantages of tax-free payment. Funds are not subject to Social Security, Medicare, Federal or State taxes. Can a small employer afford to offer a plan? With
