qualified profit-sharing plan. A plan in which an employer’s contributions are not taxed to the employee until distribution. • The employer is allowed to deduct the contributions. IRC (26 USCA) § 401(a). — Often shortened to qualified plan. [Cases: Internal Revenue 3578. C.J.S. Internal Revenue §§ 294–295, 302–304.]
profit sharing plan
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.]
