Deferred Profit Sharing Law and 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:

1. percentage of profits,

2. fixed dollar amount per employee,

3. percentage of payroll,

4. occupational class,

5. seniority,

6. matching employee contributions to a RRSP or a pension plan.

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