Will the retirement plan be financed on a profit-sharing basis?

This will determine how tax deductions are to be figured. Profit-sharing involves the risk that the benefits may be inadequate at retirement. Its great advantage from the employer's point of view is that there is no commitment requiring payments to the plan in lean years.

ERISA [see What is ERISA and how does it affect retirement plans? at ¶47,110 ] restricts the amount that can be added annually to the account of an employee under a profit-sharing plan. In 2009, the limit is the lesser of $49,000 or 100 percent of the employee's compensation. The dollar limit is subject to cost-of-living adjustments by the IRS, but can only increase in $1,000 increments.