Question

Contributions to profit sharing plans

1. Must be substantial and recurring
2. Must be made on a nondiscriminatory basis
3. May be made in employer stock

a.) 1, 2, and 3
b.) 1 and 2 only
c.) 1 and 3 only
d.) 3 only

Answer 1

Contributions to profit sharing plans must be substantial and recurring, made on a nondiscriminatory basis, and may be made in employer stock. Consequently, the correct answer to the question is (a) 1, 2, and 3.

Step-by-step explanation:

When addressing the contributions to profit sharing plans, several criteria must be met for the plan to be in compliance with regulations and fair to participants. First, contributions must be substantial and recurring, which ensures a consistent and meaningful addition to employees' retirement savings. Secondly, contributions must be made on a nondiscriminatory basis, which means that the benefits must not favor higher-paid employees disproportionately over lower-paid ones. Lastly, contributions may indeed be made in employer stock, which allows employees to potentially benefit from the growth of the company they work for.

To answer the question directly, contributions to profit sharing plans:

1. Must be substantial and recurring
2. Must be made on a nondiscriminatory basis
3. May be made in employer stock

Therefore, considering all the points, the answer would be (a) 1, 2, and 3.