profit-sharing plan


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Profit-sharing plan

An incentive system providing that employees share in companys profits through a cash fund or a deferred plan used to buy stock or bonds.

Profit Sharing

A plan by which an employer distributes a set percentage of the company's profits to its employees. Employers may distribute the portion of its profits immediately (that is, employees may receive what amounts to a bonus) or it may set up a series of accounts for employees and defer the profit sharing until employees retire. The idea behind profit sharing is to give employees an incentive to work for the company's profitability. See also: DPSO, ESOP.

profit-sharing plan

A savings plan offered by many firms to their employees in which a part of the firm's profits is funneled into a tax-deferred employee retirement account. These plans give employees additional incentive to be productive.
References in periodicals archive ?
Other business and personal planning needs can be accomplished inside a pension or profit-sharing plan, such as funding buy-sell arrangements, deferring compensation, succession estate planning, and meeting life insurance needs.
Under the Code and regulations, amounts distributed by an employer's trust, such as the profit-sharing plan in this case, are taxable to the distributee at FMV.
This article focuses on the three most popular types of tax-favored retirement plans for small firms: simplified employee pension plans, commonly called "SEPs;" savings incentive match plans for employees of small employers, referred to as "SIMPLE IRAs" and "SIMPLE 401(k) plans;" and qualified profit-sharing plans.
Other firms consider net worth and dividends to be paid before contributions to the profit-sharing plan can be made.
For example, 47 companies in our sample in 1988 had more than one ESOP and 71 had more than one profit-sharing plan. The breakdown of number of plans by plan type is given in Exhibit 2.
Participation in a profit-sharing plan typically must be offered to all employees age 21 or older who worked at least 1,000 hours in a previous year.
For 2007, there were 5,439 eligible employees in Baldor's profit-sharing plan, and the average contribution was 3.5 weeks of pay.
However, a profit-sharing plan will not be disqualified if the reason for not making contributions is lack of profits, as defined by the plan document.
A client's existing or newly created defined contribution profit-sharing plan may be an ideal source of premium dollars for clients who need to fund a buy-sell arrangement but are hesitant to do so out of personal income or business cash flow.
Parker additionally said that employees have not yet received anything from an employee profit-sharing plan and that was another reason for declining the bonus.
For example, Corporation 1 established a profit-sharing plan in 1984.
A proprietor that has an earned income of $210,000 or more can achieve the maximum deductible plan contribution with a conventional profit-sharing plan. Such an individual will be better off with a straight profit-sharing plan because this delays the decision regarding a contribution amount for a particular year until the tax due date (including extensions) for the following year.