Final answer:
Earnings and contributions in a profit sharing plan that allows participants to invest, such as 401(k)s and 403(b)s, must be allocated annually, providing flexibility and portability for the worker's retirement account.
Step-by-step explanation:
A profit sharing plan that allows participants to invest their balances in a defined contribution plan, such as 401(k)s and 403(b)s, must have earnings and contributions allocated to a participant's account annually. Unlike pensions and defined benefit plans, these plans allow both employer and employee contributions, offering a range of investment vehicles. The funds in these accounts are tax deferred, and when a worker changes employers, the account is portable and follows them. The investments made within these schemes can potentially yield real rates of return, safeguarding retirees from the erosion of their purchasing power due to inflation.