Bona fide profit-sharing plans or trusts and bona fide thrift savings plans

• Bona fide profit-sharing plans or trusts and bona fide thrift or savings plans must meet certain FLSA requirements.

Bona fide profit-sharing plans

The Fair Labor Standards Act (FLSA) describes the requirements of bona fide profit-sharing plans or trusts. FLSA requires that employers include the determination of the total remuneration for a participant’s employment in the regular rate at which the participant is employed. However, it is not necessary to include any other payment to or on behalf of the employee for services performed during a given period; that payment is contributed to a bona fide profit-sharing plan or trust. (Section 7(e)(3)(b)) (29 CFR 549.0)

Section 7(e)(4) of FLSA governs the inclusion or exclusion from the regular rate of contributions made by an employer to any plan or trust (providing for old age, retirement, life, accident, or health insurance or similar benefits for employees). (29 CFR 778.214 and 778.215) However, if such a plan or trust is combined in a single program (whether in one or more documents) with a plan or trust for providing profit-sharing payments to employees, the profit-sharing payments may be excluded from the regular rate of contributions if they meet the requirements. (Section 7(e)(4)) The contributions made by the employer providing certain benefits may also be excluded from the regular rate if they meet the requirements. (Section 7 (e)(4)) (29 CFR 778.214 and 778.215)

Bona fide thrift or savings plans

FLSA also describes the requirements of bona fide thrift or savings plans. Similar to a bona fide profit-sharing plan, FLSA requires that employers include the determination of the total remuneration for a participant’s employment in the regular rate at which the participant is employed. However, it is not necessary to include any other payment to or on behalf of the employee for services performed during a given period; that payment is contributed to a bona fide thrift or savings plan. (Section 7(e)(3)(b)) (29 CFR 549.0)

Also similar to a bona fide profit-sharing plan, Section 7(e)(4) of FLSA governs the inclusion or exclusion from the regular rate of contributions made by an employer to any plan or trust (providing for old age, retirement, life, accident, or health insurance or similar benefits for employees). (29 CFR 778.214 and 778.215) However, if such a plan or trust is combined in a single program (whether in one or more documents) with a plan or trust for providing profit-sharing payments to employees, the profit-sharing payments may be excluded from the regular rate of contributions if they meet the requirements. (Section 7(e)(4)) The contributions made by the employer providing certain benefits may also be excluded from the regular rate if they meet the requirements. (Section 7 (e)(4)) (29 CFR 778.214 and 778.215) (29 CFR 549 and 778)