Chapter 5: Profit-Sharing Plans

01.Core Concepts

• Defined contribution plan • Established and maintained by an employer • Provides for employee participation in profits • Utilizes a definite predetermined formula for allocating the contributions to the plan – must be nondiscriminatory • Either noncontributory or contributory • Noncontributory: Employee does not contribute to the plan and all contributions to the plan are from the employer • Contributory: Employee contributes to the plan