401(k)
What is a 401(k) Plan?
A 401(k) Plan provides significant advantages to both employers and employees. Not only does a 401(k) Plan attract and retain qualified employees, it also provides a low-cost means of providing visible and appreciated retirement benefits to employees. Employees have a real opportunity to participate actively in saving for retirement on a tax-deductible basis. When employer contributions are made, funds are allocated to participants before federal and state income taxes are imposed on such funds.
How does a 401(k) Plan work?
Employees choose to contribute a certain dollar amount (or percentage) to their retirement account. These contributions are made directly from pay before federal and state income taxes are imposed. These contributions earn a pre-tax investment income, and may also include a discretionary matching or profit sharing employer contribution.
A 401(k) Plan has a high degree of flexibility in its design and can also include hardship withdrawals and participant loans, among other options.
Contributions and earnings grow tax-deferred until the money is withdrawn by the employee.
Both employee and employer may make contributions to the 401(k) account up to the maximum limits shown in the table at the left.
For more information about retirement plans, contact us.
