Deferred Profit Sharing Law & Legal Definition
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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