how does a profit sharing contribution work
A profit sharing plan is a defined contribution plan in which the employer is granted responsibility for determining when and how much the company contributes to the plan. The amount allocated is usually based on the employeeâs salary level or level within the organization. Unlike a 401(k) plan, a profit sharing plan does not allow employees to make contributions. The plan only accepts contributions from the employer. Companies aren't required to contribute a set amount; instead, the amount is based on their discretion.