Bob Brinker's Marketimer

  Friday November 24, 2017

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OTHER ASPECTS OF 401(K) PLANS

Besides requirements, 401(k) plans have extra properties:

•As long as all employees are covered by the plan, there is no minimum number of employees needed for a plan to exist. Employees covered by a collective bargaining agreement may be excluded.

•Employees are always 100 percent vested (meaning that they have the right to take their accumulated pension money out of the fund) in their elective deferrals. Vesting of non-elective (employer) contributions is subject to a schedule depending on the terms of the plan.

•All 401(k) contributions (employer and employee) are deductible by the employer.

•The employee elective salary deferrals are limited to $14,000.

•For employees at least age fifty, a special "catch up" feature allows an additional $4,000 of salary deferral in 2005.

As with any account into which you put your hard-earned money, the rules may have extra details, depending on the plan. Be sure to study your plan carefully and ask questions.

Now we will briefly explain another type of 401(k) called the SIMPLE 401(k).




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