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Under section 401(K) of the Internal Revenue Code, a deferred compensation plan set up by an employer so that employees can set aside money for retirement on a pre-tax basis. Employers may match a percentage of the amount that employees contribute to the plan. Contributions by both employees and employers, as well as investment earnings and interest, are not taxed until the employee withdraws the money; if the employee withdraws the money before retirement age, he or she pays an early withdrawal penalty tax. Currently, employees are allowed to annually contribute up to 15 percent of their salary but no more than $11,000 ($12,000 for people 50 or older). Many employers now offer these deferred compensation plans in lieu of or in addition to pensions.
References in periodicals archive ?
401 (k) plan, the "missed deferral" is the participant's compensation multiplied by the ADP of the comparable discrimination testing group (highly compensated or nonhighly compensated) for the year at issue.
If a married 401 (k) participant applies for a loan, you must inform the spouse of the loan in writing, and the spouse must give his or her written consent within 30 days after receiving the notice.
By regulation, interest rates for 401 (k) loans must match prevailing rates at banks or other lending institutions in the market for the same loan with similar security.
Right now, the economics of 401 (k) service providers aren't working.
According to Salisbury's work at EBRI, companies with fewer than 2,500 employees tend in practice to rely on a defined-contribution plan, often a 401 (k), as the primar or only retirement plan.
That doesn't inhibit your company from issuing enough to sell to 401 (k) participants.
Granted, implementing such a plan will tilt your till a bit, since it may cost anywhere from $8 to $50 a head to administer your 401 (k).
401 (k) plan benefit under die plan for that plan year.
With the reduction in the 401 (a) (17) limit on compensation to $150,000 for 1994, many 401(k) plans are finding it difficult to pass their actual deferral percentage (ADP) tests, which are designed to spot discrimination in favor of highly compensated employees.
401 (a) discrimination rules, may not be exempt from the Sec.
401 (a) (9) apply in determining required distributions from IRAs.
401 (k) plans gained popularity in the early 1980s, executives have tried to devise ways to make the maximum elective deferral allowed under law.