I've heard that owners of an S-Corp are penalized if participating in a 401(k) because they are limited by the amount they may contribute to their 401(k). On the other hand, a profit sharing plan has no limits that I'm aware of regarding employer contributions. Since the owners are typically the highest paid employees, they'll get the lion's share of the contribution.My questions are: (1.)am I on target in the above statements? (2.) Does it make sense for us to offer both the long-standing profit sharing plan AND add a 401(k) so the rank and file can sock away some retirement money even if the company doesn't make a contribution to the profit-sharing plan?
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