What Are Profit Sharing Plans?

By Robin Hartill, CFP – Updated Dec 1, 2025 at 11:17 AM | Fact-checked by Margo Winton Parodi

Key Points

Profit sharing plans let employers contribute to workers' retirement, but workers can't contribute.
Contributions can be inconsistent and can be made in company stock or cash.
Plans may offer immediate ownership or vest over time, varying by company.

A profit sharing plan is a type of retirement savings plan that enables workers to share in their company's profits. Businesses of all sizes can offer profit sharing plans. But, unlike most types of retirement accounts, workers cannot make their own contributions to these plans.

If your employer offers a profit sharing plan, it can decide whether to put money into your plan and how much to contribute. But companies must establish a set formula to determine how they will calculate contributions. For example, the company may decide to contribute up to 5% of each qualifying employee's salary.

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About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

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