What is profit sharing?

Your employer may choose to contribute directly to employee 401(k) accounts through profit sharing. The term “profit-sharing” can be misleading since your employer can choose to make a contribution, regardless if they make a profit or incur a loss for the year. Thus the decision to make profit sharing contributions is at your employer’s discretion.

Profit sharing gives your employer the option to either pay a percentage of compensation or a flat dollar amount to each eligible employee's account either throughout the year, or via a single payment at the end of the year. See this article to learn more about the profit sharing formulas your employer may choose.

You are able to see if your employer offers profit sharing in your dashboard's Summary Plan Description.

Was this article helpful?
Have more questions? Submit a request