Reference no: EM13835605

Respond to Classmate Post Retirement and Real Estate

Discuss reasons why employers might want to implement a profit sharing plan, while employees might prefer a pension plan.

A big reason why an employer might want to implement a profit sharing plan rather than a pension plan is that they might not be able to make required steady contributions to the plan every year, because their annual profits can vary.

With a profit sharing plan, the employer can adjust contributions to the plan depending on the annual profit, and if deemed necessary by the employer, no plan contributions at all need to be made. Using a profit sharing plan can also act as an incentive for employees, because if they work hard for the company's success, then they can receive higher contributions to their plan.

Many employees would prefer a pension plan over a profit sharing plan because here the employer is required to make minimum contributions every year. This provides more security for the employee because he or she knows that their retirement fund is steadily increasing, whereas with a profit sharing plan no annual contributions are required. Also, profit sharing plans can put added pressure on employees for the company to succeed, which might not be a positive for all workers.