What is the primary purpose of a profit-sharing plan in a retirement context?

The primary purpose of a profit-sharing plan in a retirement context is to set aside part of the company's net income for distributions to qualified employees. This type of plan allows employers to share a portion of their profits with employees, thereby incentivizing and rewarding them for their contributions to the company's success. When the company performs well financially, eligible employees receive a share of the profits, which is often allocated into their retirement accounts. This aligns the interests of the employees with the goals of the business and encourages a sense of ownership among the workforce.

While health benefits, job security, and covering operational costs are important aspects of employee compensation and business management, they do not directly relate to the primary function of a profit-sharing plan. This plan specifically focuses on the distribution of profits to enhance employees' retirement savings rather than addressing other aspects of employment or business operations.