Profit Sharing


  • Individual account plan
  • Contributions are not fixed, but are discretionary up to a maximum deductible contribution of 25% of covered payroll, but not more than $55,000 in 2018 per individual.
  • Contributions are not contingent upon the employer having current or accumulated profits.
  • The plan must specify the formula to be used to allocate any contributions among the participants.
  • Various allocation formulas can be used including age-weighted and cross-tested.
  • Forfeitures can be used to reduce employer contributions or be reallocated to participants.

Allocation formulas

Age Weighted

Cross Tested