401k Profit Sharing Plan | Definition | What is a 401k Profit Sharing Plan?

401k Profit Sharing Plan

401k Profit Sharing Plan | Definition

A profit sharing plan is one type of defined contribution plan in which an agreement between a corporation and its employees allows its employees to share in the company's profits. In a profit sharing plan, the employer contribution is based on the company's profits rather than on a predetermined rate. In highly profitable years, the company may contribute the maximum allowable. In less prosperous years, the company may contribute a reduced amount or even nothing.

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