Profit Sharing Plan

A profit sharing plan is a defined contribution retirement plan that businesses should consider when they're ready to offer a retirement plan to their employees.  A profit sharing plan allows the employer to share the business profits with their employees.





Generally businesses come up with a definite formula for figuring the amount of profits to share with their employees.  Employers are free to change this formula each year.





A definite formula is required for the following:

• determining how to allocate the contributions among all the participants


• determining how to distribute the funds accumulated after a fixed number of years, the attainment of a certain age, or upon the prior occurrence of some event such as a layoff, illness, disability, retirement death, or severance of employment.

Forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way or they can be used to reduce employer contributions.

Tax law can change daily, please talk to your tax adviser before making decisions that will affect your taxes.