profit sharing plan

An employee benefit plan that allows an employee to share in the company’s profits.

• ERISA governs the administration of many profit-sharing plans, which provide for discretionary employer contributions and provide a definite predetermination formula for allocating the contributions to the plan among the participants. Contributions are frequently allocated in proportion to each participant’s compensation. See EMPLOYEE BENEFIT PLAN; EMPLOYEE RETIREMENT INCOME SECURITY ACT. [Cases: Pensions 24.1, 28. C.J.S. Pensions and Retirement Plans and Benefits §§ 11–15.]

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