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Deferred Profit Sharing Law & Legal Definition

Related to Deferred Profit Sharing

Deferred profit sharing is a qualified, tax-deferred retirement plan where the employer contributes a percentage of pre-tax profits to employee accounts. The allocation of funds to employee accounts can be arbitrary or follow a contribution formula, using the following factors:

  • percentage of profits,
  • fixed dollar amount per employee,
  • percentage of payroll,
  • occupational class,
  • seniority,
  • matching employee contributions to a RRSP or a pension plan.

Contributions and expenses are tax-deductible to the employer. Contributions are not added to employees' earnings and do not increase payroll taxes. 






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