A plan by which an
employer distributes a set percentage of the company's
profits to its
employees'
retirement accounts, with older employees receiving more. That is, a company sets up a series of accounts for employees and places a portion of its profits in them until employees
retire. Under an age-weighted profit-sharing plan, accounts for older employees receive a larger amount each time the company makes a distribution. The company divides up the distributions in such a way that the older employees (who are closer to
retirement) and the younger employees (whose account will benefit more from
compound interest) will receive the same amount from the profit-sharing following retirement. The idea behind any
profit-sharing plan is to give employees an incentive to work for the company's profitability.