How often must contributions be made to a profit-sharing plan?

In a profit-sharing plan, contributions are typically made on an annual basis, with employers having the flexibility to decide how much to contribute each year, based on the company's profits. This means that while contributions can be made at various times during the year, they are formally reported and funded on an annual basis, aligning with the company's fiscal year.

Annual contributions allow employers to assess their financial performance over the year and make a decision regarding how much they can set aside for their employees' retirement benefits. This approach also accommodates fluctuations in profits, which enables employers to contribute when it is financially feasible, rather than adhering to a strict quarterly, monthly, or other periodic schedule that may not align with their cash flow or business performance.

The flexibility to contribute annually is a significant feature of profit-sharing plans, as it aligns the interests of both employees and employers. Employees benefit from receiving contributions based on the company’s profitability, while employers are not pressured into regular, mandatory payments that could impact their finances negatively.