An arrangement in which an employer shares some of its profits with its employees. The compensation can be stocks, bonds, or cash, and can be immediate or deferred until retirement. Profit-sharing allows for changing contributions each year. Contributions are determined by a formula to allocate the overall contribution and distribution of accumulated funds after the retirement age. Unless the plans are defined as an elective deferral plan, the contributions are not tax deductible. Contributions and earnings can grow tax-deferred until withdrawal.

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All of the employees were excited when our CEO announced that the company would establishing a profit-sharing plan and we would each receive a cut from our profits.

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We were doing a lot of profit-sharing and I thought it would actually be good for business and for everyone else.

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The profit-sharing plan was an important consideration for the applicants as they thought that type of offering meant other good things in the future as well would be likely.

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Cash or Deferred Arrangement 1099-R Form