FIN $410$: Retirement Planning

Project $3$

Learning Goals:

Demonstrate an understanding of Profit Sharing Plans, including eligibility,

discrimination testing, and options for compliance.

Notes:

Before attempting this project, I recommend rereading Chapter $5$ of your textbook,

pages $239-245$ have useful examples and explanations for this project.

This project is a learning opportunity $-$I encourage you to utilize the discussion boards to

ask for clarification or guidance. Please do not email me about questions in the project, if

we discuss the questions in the discussion board others with the same question may

benefit too.

Please have realistic expectations for responses, questions asked the day before the due

date may be missed, so be proactive.

There is a $1-$Day late penalty for this assignment.

Client Background:

TechSynergy Designs is a forward$-$thinking tech design agency located in Austin, Texas.

Founded by Jackson and Ava a decade ago, TechSynergy Designs has grown into a leading tech

development firm in the Texas area. The company offers an innovative $401\frac{k}{?}$ profit sharing plan

with the following features:

Eligibility: Employees become eligible if they are $21$ years of age and have completed

one year of service.

Match: The company provides a dollar$-$for$-$dollar match on employee contributions.

Vesting: Vesting occurs at a rate of $20\%$ per year, starting from the first year up to the

fifth year.

Highly Compensated Definition: Uses top $20\%$ election.

Profit$-$Sharing Contribution: TechSynergy Designs typically makes a substantial

profit$-$sharing contribution, although the exact percentage may vary.

Rollovers: The plan allows for rollovers from other qualified plans and IRAs.

Employee Data:

EE# Employee Ownership Age Tenure Salary Deferral

EE# Employee Ownership Age Tenure Salary Deferral

Note: Zoe is Ava's daughter. She graduated from the University of Texas School of Design five

years ago.

Your Task: $($Explain your answers in detail, providing support from the textbook or other

relevant sources. Your answers should be formatted as a report you are preparing for your

clients' financial planning team, so be professional and thorough.$)$

Who is not eligible for the $401(k)$ plan?

Who is highly compensated?

What is the most that TechSynergy Studio could contribute to the profit$-$sharing plan

for the current year assuming the salary deferrals stay constant?

What is the actual deferral percentage for the highly compensated employees?

What is the actual deferral percentage for the non$-$highly compensated employees

Does the plan pass the ADP test? Why or why not and what can the company do if the

plan does not pass the test?

How many years of service does Liam currently have for purposes of vesting?