In a Deferred Profit Sharing Plan (DPSP), who contributes to the plan?

In a Deferred Profit Sharing Plan (DPSP), the primary contributor is the employer. This type of plan is designed as a way for employers to share the profits of the company with their employees in a tax-advantaged manner. The contributions made by the employer are typically based on the company's profits, and employees receive the benefits when they retire or leave the company.

The unique characteristic of a DPSP is that employees do not make contributions; they benefit from the employer's contributions alone. This highlights the employer's role in the plan, reinforcing the notion that the plan is a form of employee benefit funded solely by the employer’s profits. Employees may receive a share of the plan's value, but they are not contributing directly to it through their own funds.

Understanding this structure is important because it emphasizes the employer's commitment to sharing success with their employees, which can enhance employee satisfaction and retention.