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Types of Defined Contribution Plans
Let's take a look at some defined contribution plan options:
- profit sharing
- Simplified Employee Pension Plan (SEP)
- Employee Stock Ownership Plan
- 401(k)
- 403(b)
Profit sharing
A Profit Sharing Plan is a defined contribution plan under which the plan may provide, or the employer may determine, quarterly or annually, how much will be contributed to the plan (out of profits or otherwise). The plan must contain a formula for allocating to each participant a portion of the total profit contribution. A company is not required to make distributions every year.
Memory Jogger
Profit sharing plans require the employer to provide a formula for:
Looking to Benchmark Pay?
See our salary, cost-of-living, and executive compensation data in action.