Profit sharing Plan

Profit sharing Plan

Profit sharing Plan means:
an agreement that allows employees to share in company profits. A Profit sharing plan is a contribution plan under which the amount contributed to the employee's account is based on a percentage of the employer's profits. Annual contributions are made by the company, when it has profits, to a profit- sharing account for each employee, either in cash or in a deferred plan; these contributions may be invested in stocks, bonds, or cash equivalents. If the profit-sharing plan is classified as a defined-contribution plan, the annual addition to an employee's account may not exceed the lesser of $30,000 or 25% of the employee's compensation. There is a 15% deduction limit for a defined-contribution Keogh plan. Former IRC (check if this IRC provision is current here) §401.

Description and Definition of Profit Sharing Plan

A defined contribution plan for distributing a predetermined percentage of a company's profits to its employees that are eligible to participate in the plan.


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