A profit sharing program is a plan for retirement that entitles employees to a share in the profits of a business. Also known as a deferred profit sharing plan, the employee is given a percentage of the business ‘profit based on quarterly or annual earnings of the company.
A profit sharing retirement plan is an excellent way for a company to provide employees with a sense of ownership in the business. However, there are usually certain restrictions regarding how and when the funds can be withdrawn without incurring any penalties.
An employee profit sharing plan is any retirement plan that will accept discretionary contributions by the employer. Therefore, a plan with contributions from the employee, like a 401k, is not a profit sharing plan.
A company profit sharing plan is set up by the employer. This makes it possible for the employer to decide how much each employee will receive. The plan can be adjusted by the company as the need arises, which means there may be years where no contributions are made at all. For the years that contributions are made, the company will follow a set formula to allocate profits.
Whether you are a business owner interested in learning about profit sharing plans for small businesses or you are an employee considering enrollment in the plan offered by your employer, Landmark Financial is here for you. If you are located in Fort Smith AR, Little Rock AR, Rogers AR, Russellville AR, Surprise AZ, or Scottsdale AZ, give us a call toll-free today at 800-825-3608.