Company-paid pension and profit-sharing distributions

[Guest Carma Christensen]

Our pension plan requires an employer contribution of 11.11% on all taxable compensation. Employee contributions are not allowed.

At the end of the year, the Company sets aside a dollar amount of company profits for a profit-sharing distribution, which is distributed during the next calendar year. The amount set aside is distributed as 10% pension and the remainder in taxes and cash.

Two questions:

1) Do we need to do anything in our internal bookkeeping to ensure this will considered an "employer contribution" rather than an "employee contribution"?

2) We are considering giving employees the option of contributing profit-sharing amounts to the company 401(k) instead. Some managers feel employees should get the same gross amount for a 401(k) contribution as if they took cash and pension. Accounting is concerned that this methodology could indicate that the employee had control in making the contribution, making it an employee contribution rather than company. Do you see that as being an issue?

[Lisa Hand]

Carman:

You need to post this question on the Retirement Plan work group.

Thanks