Question

A smaller company with 75 employees wishes to establish a retirement plan. Some of the employees are highly paid, but most are part-time low wage earners. The company would like to maximize contributions for the highly-paid employees to keep these talented individuals. The company has erratic cash flow but is profitable overall. What type of retirement plan would be the best for the company

Answer 1

The correct answer is: Profit Sharing Plan.

Step-by-step explanation:

A Profit Sharing Plan is a type of retirement plan where employers provide workers contributions based on their income and company's earnings. A Profit Sharing Plan is suitable for companies with changing earnings because in case the firm does not have revenues given a period, the firms are not obligated to provide contributions to its employees.

The maximum contribution is higher relative to other retirement plans -25% for the Profit Sharing Plan. Top managers would be benefited since they receive higher wages.