Profit Sharing Cont. w/ an integrated plan

[Guest Sara H]

Could someone explain to me the integrated plan feature? In a plan that I am working on, they have chosen the integrated plan feature which says that the profit sharing contribution shall be allocated based on a participant's compensation in excess of 65% of the taxable wage base. (The integration % is reduced from 5.7% to 4.3% in this case.)

The employer wants to do a 3% profit share for its employees. Does this mean that all employees will get 3% except for any employees who earn over 65% of the taxable wage base? And, will the employees with the higher compensation get an additional 4.3% profit sharing contribution calculated on their compensation over the 65% of the wage base? I'm confused.

[Chester]

The total contribution will be 3% of payroll, which means that those employees earning less than the wage base will get slightly less than 3% of pay for a contribution, and those employees earning more than the wage base will receive slightly more than 3% of pay (assuming the contribution is based on eligible payroll). Please keep in mind that the excess percentage (percentage applied to pay in excess of the integration level) can not be more than double the base percentage(the percentage applied to pay not in excess of the integration level). Therefore, the 4.3% spread may not be allowable, if it results in an excess percentage which is more than double the base percentage. The base and excess percentages can be determined through simple algebra once you know the total contribution amount, total eligible pay below the integration level, and total eligible pay above the integration level.