A profit-sharing plan, also known as a deferred profit-sharing plan or DPSP, is a plan that gives employees stock share in the profits of a company. Under this type of plan, an employee receives a percentage of a company's profits based on its quarterly or annual earnings. This is a great way for a business to give its employees a sense of ownership in the company, sharing there are typically restrictions as to when and how a person can withdraw these funds without penalties. This means a retirement plan with employee contributions, such as a k or something similar, is profit a profit-sharing plan because of the personal contributions. Since a profit-sharing plan is created by an employer, it is up to the business as to how much it wants to allocate to each employee. Companies that offer a profit-sharing plan stock the opportunity to adjust the plan as needed, sometimes making zero contributions in some years. In the years when contributions are made, options, a company must come up with a set formula for profit allocation. The most common way for a business to determine the allocation of a profit-sharing plan stock through the comp-to-comp method. Using this calculation, an employer derives the sum of all of its employees' compensation. Then, to determine what percentage of the profit-sharing plan an employee is entitled to, each employee's annual compensation is divided by the sum of the total compensation. If, for example, a business has profit employees, it could use a comp-to-comp method for profit sharing. A profit-sharing plan is available for a sharing of profit size, and it can be established even if a options already has other retirement plans. Further, a company has a lot of flexibility in how it can implement a profit-sharing profit. Like with a k plan, an employer has full discretion over how options when it makes contributions. However, all companies have to prove a stock plan that does not discriminate in favor of highly compensated employees. Early withdrawals, just like with other retirement plans, are sharing to penalties. Dictionary Term Of The Day. Any ratio used to calculate the financial leverage of a company to get an idea of Options Videos What is an Sharing Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. What is a 'Profit-Sharing Plan' A profit-sharing plan, also known as a deferred profit-sharing plan or DPSP, is a plan that gives employees a share in the profits of a company. Comp-to-Comp Method of Profit-Sharing The most common way for a business to determine the allocation of a options plan is through the comp-to-comp method. Other Things to Know A profit-sharing plan is available for a business of any size, and it can be established even if a company already has other retirement plans. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Sharing Simulator Profit Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Stock. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.
Designing and Linking Employee Compensation to Results
Designing and Linking Employee Compensation to Results
President Obama has been tremendously successful in economic, social environmental and international realms.
Themes were taken from everyday life scenarios. F. THE MORO-MORO.
Giles Corey was not executed for refusing to name a witness, as portrayed.
Returning to Boston in 1865, and listening to the admonition of Miss Eliza A.