Hi all - recently signed an offer with a MM NYC PE fund which describes a "profit sharing plan" which is set to a percent of W2 wages and is vested and subject to IRS limit. What does this mean and how does it work? Has anyone seen this at their fund? Clearly this is not co-invest or carry.
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Bump.
You should have asked for a model to monkey with so you really understand it before signing. Why ask after signing? lol
Because this was an offer I would've taken regardless, I see this as a very incremental sweetener and the cash comp is totally fine for me.
Isn't that just "shadow" carry where the upside is limited to that set percentage?
Is this part of the 401k plan?
https://www.irs.gov/retirement-plans/plan-participant-employee/retireme…
I don't think so, because this benefit was stated in addition to the 401k match which was outlined seperately.
I had something similar in my offer. The way it works at my firm is they put money into your 401k after exit.
It’s similar to what traditional firms would do in a 401K match. For my firm, they did a profit sharing of x% of your 2021 salary + additional contribution based on firm profits. Since 2021 was strong for PE across the board, it ended up being way more than what any firm does for match.
Thanks, does it turn into cash comp if you already contributed the IRS limit for the year?
The IRS limit does not apply here. My firm contribution was much higher than the limit.
There's a significantly higher contribution limit including employer contributions - [$61k] in 2022.
Something that businesses used to give employees in the 90s where they'd actually share the profits of the business with the workers of said business.
It may be a profit share number and a safe harbor contribution so high earners in the firm can pull down additional money into retirement accounts.
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