Profit Sharing Calculator
Profit sharing plans allow employers to contribute a discretionary share of company profits to employee retirement accounts each year. The IRS caps employer profit sharing contributions at 25% of total eligible employee compensation, with individual allocations subject to the Section 415 annual addition limit of $69,000 for 2024. The two most common allocation methods are comp-to-comp (proportional to salary) and equal share (flat dollar per employee). This calculator lets you enter total profit sharing pool, total eligible payroll, and number of eligible employees to compute both the aggregate allocation percentage and the per-employee payout under each method.
Profit sharing formula
Pool % of Payroll = Profit Sharing Pool / Total Payroll * 100
Comp-to-Comp Allocation = Employee Salary / Total Payroll * Pool
Equal Share Allocation = Pool / Number of Eligible Employees
IRS limits for 2024
- Maximum employer profit sharing: 25% of total eligible payroll.
- Section 415 annual addition limit: $69,000 per participant (or 100% of compensation if less).
- Compensation cap for allocation: $345,000 per employee.
- Plan must use a definite written formula and cannot discriminate in favor of highly compensated employees.
Profit sharing: frequently asked questions
What is a profit sharing plan?
A profit sharing plan is a type of defined contribution retirement plan under which an employer contributes a portion of company profits to employee accounts. Contributions are typically discretionary and must be made according to a definite formula or determined annually.
What is the IRS annual limit for profit sharing contributions?
For 2024, the IRS limits total annual additions to a defined contribution plan (including profit sharing) to the lesser of $69,000 or 100% of the employee's compensation. Profit sharing alone cannot exceed 25% of total eligible payroll.
What is the comp-to-comp profit sharing method?
Under the comp-to-comp (pro-rata) method, each employee receives a share of the profit sharing pool proportional to their compensation. If an employee earns 10% of total payroll, they receive 10% of the profit sharing pool.
What is the equal share profit sharing method?
Under the equal share (flat dollar) method, all eligible employees receive the same dollar amount regardless of salary. This is simplest to administer and maximizes benefit equity across compensation levels.
Can profit sharing contributions go into a 401(k)?
Yes. Employer profit sharing contributions can be deposited into employees' 401(k) accounts. Total annual additions (employee deferrals plus employer contributions including profit sharing and match) are subject to the Section 415 limit of $69,000 for 2024.
Sources
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.