How do employer profit-sharing contributions to my 401(k) work?

Profit-sharing is a discretionary employer contribution separate from any match. The company decides each year whether and how much to contribute, often as a uniform percentage of each eligible employee's pay, and it does not require you to defer anything yourself to receive it. It counts under the overall Section 415(c) combined limit, not your personal deferral limit.

Profit-sharing contributions typically follow the plan's vesting schedule, so you may not fully own them if you leave early. Because they are discretionary, you cannot count on them year to year. They are a nice bonus on top of your deferrals and match, and they let high earners and business owners funnel large sums into tax-advantaged retirement savings. Check your plan document for the specific allocation formula and vesting rules.