What is the difference between a profit-sharing plan and a 401(k) plan?
In a traditional profit-sharing plan, the employer makes contributions to the accounts of eligible employees regardless of whether they choose to contribute to the plan. In a 401(k) plan, the participant chooses to contribute to the plan and the employer may or may not make matching contributions to the 401(k) plan in addition to the amounts the participant elects to defer. 401(k) plans may also have a profit-sharing feature allowing the employer to make profit-sharing contributions to the 401(k) plan accounts of eligible employees.
