Deferred Profit Sharing Plan (DPSP)

A deferred profit sharing plan (DPSP) is a type of defined contribution plan that allows employers to make contributions to employees' retirement accounts on a tax-deferred basis. DPSPs are similar to 401(k) plans in that they offer employees the opportunity to save for retirement with pre-tax dollars, but there are some key differences between the two plans.

One of the biggest differences between DPSPs and 401(k) plans is that DPSPs are not subject to the same contribution limits as 401(k) plans. Employers can contribute up to 25% of an employee's salary to a DPSP, while the maximum contribution to a 401(k) plan is 100% of an employee's salary up to $19,500 in 2023.

Another difference between DPSPs and 401(k) plans is that DPSPs are not required to offer employer matching contributions. Employers are not required to make any contributions to a DPSP, but they may choose to do so. 401(k) plans, on the other hand, are required to offer employer matching contributions if they meet certain requirements.

DPSPs also offer employees more flexibility in terms of when they can withdraw their money. Employees can typically withdraw money from their DPSPs after they have reached age 59 1/2, while 401(k) plan withdrawals are subject to more restrictions.

Overall, DPSPs can be a good option for employees who want to save for retirement with pre-tax dollars and who have the flexibility to withdraw their money after they reach age 59 1/2. However, it is important to compare DPSPs with other retirement savings options before making a decision about which plan is right for you.

Here are some additional details about DPSPs:

* DPSPs are sponsored by employers and are available to employees of those employers.
* Employees can contribute up to 25% of their salary to a DPSP, up to a maximum of $58,000 in 2023.
* Employers are not required to make contributions to a DPSP, but they may choose to do so.
* Employees can typically withdraw money from their DPSPs after they have reached age 59 1/2.
* DPSPs are subject to the same investment options and fees as 401(k) plans.

If you are considering a DPSP, it is important to speak with a financial advisor to learn more about the plan and how it can fit into your overall retirement savings strategy.