Since starting at my company, we have been waiting for them to start a 401K Match. Now, our company just announced that instead of a matching 401K, they have decided to initiate Profit-Sharing. What exactly does that mean and is it better than a 401K Match for non-management employees? With employer match, the employer is committing to contribute a set percentage (up to a specified limit), whether the company is doing well or not. With profit sharing, the employer is offering a discretionary contribution dependent upon the company's profitability. My employer, for example, does both: a 50% match up to 6% and, when possible, a discretionary profit sharing contribution of 2% to 10%. The profit sharing contribution is voted on by the Board of Directors.Shy
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