Profit sharing is a retirement plan benefit that your employer may choose to make toward employees’ 401(k) accounts after the end of the plan year. You can receive a profit sharing contribution as long as you are eligible to participate in the plan, even if you do not personally contribute.
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The term “profit-sharing” can be misleading because employers can elect to make a contribution of any amount at their discretion, whether they make a profit or incur a loss for the year.
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Profit sharing is made as traditional, pre-tax contributions. Based on the plan document’s profit sharing formula, your employer will either contribute a percentage of compensation or a flat dollar amount.
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Profit sharing contributions may be subject to a vesting schedule based on the details outlined in the plan. You can see if your employer offers profit sharing in your dashboard's Plan Details page.
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