Profit sharing plans were created to allow business owners to make discretionary retirement plan contributions on behalf of their employees. The contributions are generally stated as a percentage of payroll and are not taxable to employees when made. Profit sharing plans may also be combined with 401(k) plans permitting both employee and employer retirement plan contributions.

• Only a business owner can establish a profit sharing plan
• Any type of company can adopt a profit sharing plan including non-profit businesses
• Company contributions are flexible and can be changed from year to year
• Profit sharing contributions are tax deductible
• Profit sharing plans may require vesting
• Loans and hardship withdrawals may be available
• Company contributions are non-taxable when made and grow tax-deferred until removed
• Can be combined with a 401(k) plan
• Minimum distributions are required, but may be delayed until retirement
• Distributions are taxable and may be subject to penalty taxes when taken before age 59½

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