Question

Prosper Company has just implemented a type of qualified retirement plan in which participating employees are divided into groups or classes, and each group or class receives an employer contribution equal to a percentage of compensation. Prosper Company's retirement plan is ____________________.

1. Profit-Sharing Plan
2. 401(k) Plan
3. Money Purchase Pension Plan
4. Employee Stock Ownership Plan (ESOP)

Answer 1

Prosper Company's retirement plan that allocates employer contributions to groups of employees based on a percentage of their compensation is likely a Profit-Sharing Plan.

Step-by-step explanation:

The Prosper Company's retirement plan that involves dividing participating employees into groups or classes, and each group receives an employer contribution equal to a percentage of compensation, is most likely a Profit-Sharing Plan. This type of plan allows for a contribution based on the company's profits, which are then divided among the employees based on predetermined percentages. It contrasts with other types of qualified retirement plans, such as 401(k)s or Employee Stock Ownership Plans (ESOPs), which generally do not allocate contributions in this grouped manner. Additionally, these plans are great tools for employers to share success with their employees, fostering a sense of ownership and investment in the company's performance.