Retirement Plans

401(k) Plans
401(k) Plans are among the most desirable retirement plans offered because of their flexibility as well as the tax-deferred savings they offer plan participants and employers:

• Participants can make pre-tax contributions, reducing their current-year taxable income
• The value of their 401(k) investment grows, tax deferred, until it is withdrawn at retirement age and taxed as ordinary income
• Employers can, but are not required to, make matching contributions to each employee’s account which are deductible to the employer and non-taxable to the employee
• If the plan allows, participants can direct how their 401(k) contributions are invested
• If participants leave the organization, they can roll their 401(k) money over into another type of tax-deferred account
• If participants want to withdraw 401(k) funds prior to retirement, they may do so for certain IRS-approved situations but may also pay taxes and a penalty

 

Most participants can defer up to $15,000 annually, or the annual IRS dollar maximum, with employers matching anywhere from 0 to 6% if they so choose. Within the limits of IRS rules, employers can set their own vesting schedule for the matching dollars they contribute.

 

With the exception of government entities and self-employed individuals, almost any type of organization can establish a 401(k) Plan.

 

There are a number of administrative issues to consider, including annual nondiscrimination compliance testing required by the IRS. To learn more about the details of administering a 401(k) Plan, as well as more in-depth information about the rules of participation, please contact us for a personal consultation.