Frequently Asked Questions
Everything You Need to Know
Am I guaranteed a bonus every year?
No. Awards are entirely discretionary. Each year, the Plan Administrator evaluates company performance — including revenue, profitability, and cash flow — and decides whether to grant awards and in what amounts. A bonus in one year does not guarantee a bonus in any subsequent year.
Who is eligible to participate?
All full-time employees who have started employment no later than November 1 of the applicable Performance Year are eligible, subject to the Plan Administrator’s discretion. Part-time and seasonal employees are not eligible under the current plan terms.
When will I find out my award amount?
If an award is granted for a given Performance Year, you will receive a written Award Notice by March 15 of the following year. This notice will show your total award amount, the 25/75 payment breakdown, your complete award history, and your upcoming payment schedule.
When do I get paid?
Each award is paid in two installments. The first payment — 25% of the total award — is paid by May 15 following the Award Notice. The remaining 75% vests and is paid on May 15, five years after the first payment date. For example, if you receive a 2026 Performance Year award, 25% is paid May 15, 2027, and the remaining 75% is paid May 15, 2032.
What happens if I leave the company?
If your employment ends for any reason — whether you resign, are terminated with or without cause, or leave due to death or disability — all unvested amounts are immediately and permanently forfeited. There are no exceptions. Only amounts that have already vested and been paid belong to you. This is a key feature of the plan: it rewards people who stay.
Can I defer or accelerate my payments?
No. Payment dates are fixed under the plan. You cannot elect to receive your deferred balance early, nor can you push payments to a later date. This structure is important for the plan’s compliance with IRS rules.
Are bonus payments taxed?
Yes. All payments are subject to applicable federal, state, and local income tax withholding, as well as FICA taxes. Taxes are withheld at the time of payment, and the net amount is reflected on your pay stub. The gross amount of each payment is shown on your Payment Confirmation statement.
Is this a retirement plan?
No. The Employee Profit Sharing Bonus Plan is a bonus program — not a pension, retirement plan, or ERISA plan. It does not replace or affect your 401(k), IRA, or any other retirement savings. Awards are intended to qualify as short-term deferrals exempt from Section 409A of the Internal Revenue Code.
Can I transfer my award to someone else?
No. Awards are non-transferable and non-assignable. Your rights under the plan cannot be sold, pledged, or given to another person.
How are award amounts determined?
Award amounts are determined at the sole discretion of the Plan Administrator based on a range of factors that may include company revenue, profitability, cash flow, individual role and contribution, and other criteria. Awards may vary from year to year and from employee to employee.
What statements will I receive?
Award amounts are determined at the sole discretion of the Plan Administrator based on a range of factors that may include company revenue, profitability, cash flow, individual role and contribution, and other criteria. Awards may vary from year to year and from employee to employee.
How is this different from a 401(k) or profit sharing retirement plan?
A 401(k) or qualified profit sharing plan is a retirement vehicle governed by ERISA, with strict contribution limits, nondiscrimination testing, and administrative requirements. The Employee Profit Sharing Bonus Plan is not a retirement plan at all — it’s a discretionary bonus program. There are no contribution limits, no ERISA compliance obligations, and no trust or funding requirements. The employer retains full discretion over whether to grant awards and in what amounts each year.
Is this plan subject to ERISA?
No. The plan is designed to qualify for the bonus program exemption under Department of Labor Regulations Section 2510.3-2(c). Because payments are not systematically deferred to termination of employment or beyond, and the plan is not intended to provide retirement income, it falls outside ERISA’s coverage.
How does the Section 409A exemption work?
Awards under the plan are intended to qualify as short-term deferrals exempt from Section 409A of the Internal Revenue Code. Under the short-term deferral rule, compensation subject to a substantial risk of forfeiture is exempt from 409A provided it is paid within the applicable timeframe after the risk of forfeiture lapses. The plan’s vesting and payment structure is designed with this exemption in mind. As with any tax-sensitive arrangement, employers should consult their own tax and legal advisors.
Am I required to grant awards every year?
No. Awards are entirely discretionary. The Plan Administrator has full authority to decide each year whether to grant awards, which employees receive them, and in what amounts. There is no obligation to grant awards in any given year, and participation in one year does not create any expectation or entitlement for future years.
Can I choose which employees participate?
Yes. Eligibility requires full-time employment and a start date no later than November 1 of the Performance Year, but beyond those baseline criteria, the Plan Administrator has discretion over who receives awards and in what amounts. This allows you to tailor an awards structure that makes sense for your company.
How does this affect my company's tax deductions?
Bonus payments made under the plan are generally deductible as ordinary and necessary business expenses in the year they are paid to employees, subject to applicable tax rules including the reasonable compensation requirements under Section 162 of the Internal Revenue Code. Employers should consult their tax advisors for guidance specific to their situation.
Can this plan work alongside our existing benefits?
Absolutely. The plan operates independently of your 401(k), health insurance, PTO, and any other benefits. It is a standalone bonus arrangement that layers on top of your existing compensation and benefits structure. Many employers find it fills the gap between standard benefits (which every competitor offers) and equity-based compensation (which most private companies can’t or don’t want to offer).
What's involved in setting up the plan?
Setup involves adopting a plan document, establishing internal processes for determining and communicating awards, and preparing the employee communication templates (Award Notices, Payment Confirmations, and Mid-Year Updates). There is no government filing, trust creation, or third-party custodian required. If you’re interested in getting started, reach out to us and we can walk you through the process and provide the tools you need.
Who administers the plan?
The Plan Administrator is typically executive management of the adopting company. They have full discretionary authority to interpret the plan, determine eligibility, set award amounts, and handle all administration. We can provide guidance, templates, and ongoing support to make administration straightforward.