profit sharing

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profit sharing,

n a mechanism for funding a retirement plan for employees or members of a professional association. Members are eligible for a percentage of the net income based on predetermined formulae. Such plans, properly executed, are legal and ethical and are to be differentiated from fee splitting, which is illegal and unethical, in which a referring professional shares in the fee-for-service income of another professional.


the amount by which income exceeds expenditure.

profit sharing
profit sharing between a professional and a lay person is illegal in most countries because it is considered to be improper for a nonveterinarian to have any authority over the quality and style of the work of a professional person.
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Participation in a profit-sharing plan typically must be offered to all employees age 21 or older who worked at least 1,000 hours in a previous year.
There are several factors a company must consider with a profit-sharing plan.
In Section I of the paper, we provide an overview of some institutional features of ESOPs and profit-sharing plans.
This article describes the major features of today's profit-sharing plans, based on data on plan provisions from the BLS 1989 Employee Benefits Survey.
Additionally, new funds going into a profit-sharing plan are tax-deductible.
Based on the principles used to create age-weighted profit-sharing plans, it is possible to go beyond the age-weighted allocation formula and develop alternatives that better meet the objectives of providing for more senior people.
Once profit-sharing plan limits were increased to the lesser of 25% or $42,000 (2005 limit under Section 415), more "room" became available under these plans.
To maximize these contributions employers commonly offer "paired" plans, consisting of a money purchase pension plan (MPPP) and a profit-sharing plan.
For business entities with a profit-sharing plan, the plan trustee can be authorized to purchase life insurance with the monies in one owner's or partner's segregated profit-sharing account on another co-owner's life.
Most profit-sharing plans allocate the corporations contributions only on the basis of compensation.
Other consequences of reclassification include nondiscrimination and coverage requirements in pension and profit-sharing plans and workers' compensation rules.
Age-weighted profit-sharing plans allow contributions to be allocated on the basis of both relative compensation and age.