Profit-Sharing Plan

An employer-sponsored qualified-retirement-plan, established by an employer for the benefit of its employees and their beneficiaries.


Profit-sharing plans are defined contribution plans,  funded with employer contributions, but can include a 401(k) feature


Contributions to profit-sharing plans are usually discretionary, i.e. the employer can choose each year whether it wants to fund the plan. However, some plans are designed to allow the employer to choose whether it wants to adopt a mandatory contribution feature in the plan


Earnings in a profit-sharing plan accrue on a tax-deferred basis. Contributions and earnings are taxable to the participant when withdrawn from the participant’s profit-sharing account.


(Source: Retirement Dictionary)