Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

The profit-sharing plan does not require an initial actuarial computation for contributions because it is designed to allow an employer to contribute to employees' retirement accounts based on the company's profits. The contributions can vary from year to year, and they are typically discretionary, meaning that the employer can decide how much to contribute without having to perform complicated actuarial calculations to determine a set obligation.

In contrast, defined benefit plans require actuarial computations to determine the amount of funding needed to meet promised future benefits, as these plans guarantee a specific retirement benefit. Money purchase plans also require a defined contribution amount that is calculated based on actuarial assumptions to ensure that future obligations can be met. Flat benefit plans, which provide a set benefit amount regardless of salary, may also involve some degree of actuarial analysis to ensure adequate funding.

Due to the flexible nature of contributions in a profit-sharing plan, employers benefit from increased adaptability in their funding strategies, which is a significant characteristic distinguishing it from the other types of plans.