KNOWLEDGE EXPECTED OF: Both CFP® Professionals and QAFPTM Professionals
- Explain methods by which contributions to a deferred profit sharing plan may be made, such as:
- Percentage of profits
- Percentage of employee’s earnings
- Fixed dollar amount per employee
- Identify the maximum contributions that can be made to a deferred profit sharing plan.1
- By the employer
- By the employee
- Identify the contributions made to a deferred profit sharing plan member for a given plan.
- Explain how each of the factors may impact the suitability of contributing to a deferred profit sharing plan, such as:
- Risk tolerance
- Effect on current cash flow
- Effect on future cash flow (impact on value of future pension benefit)
- Effect on current net worth
- Effect on future net worth
- Fiscal discipline of individual
- Psychological impact from decision
- Impact on pension adjustment
- Expected tax rate at time of receipt of pension benefit
- Impact of future receipt of pension benefits on government benefits
- Evaluate how each of the factors may impact the suitability of contributing to a deferred profit sharing plan.
- Explain the impact of a contribution to a deferred profit sharing plan on registered retirement savings plan contribution room.
- Explain the tax impact of contributing to a deferred profit sharing plan.
- Estimate the tax impact of contributing to a deferred profit sharing plan.
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