Amounts contributed to the plan, by the employer or the participant, are not currently taxable to the participant. This tax sheltered status also applies to earnings on plan contributions.
Amounts participants may defer are significantly higher in a 401k plan as compared to a traditional IRA.
Participants may elect to invest part or all of their account balance in various mutual funds chosen by the employer. The mutual fund choices are designed to accommodate a variety of investment styles and objectives.
Your employer may make a matching contribution to your account. The matching contribution is based on amounts the participant defers.
Distributions from the participant’s account can be transferred to, or rolled over to, the participant’s Individual Retirement Account, or to another qualified plan. Please review our Rollover Reference Chart for specific examples.
If your employer’s plan has loan options available, you may borrow from your vested account balance. The Internal Revenue Service has established specific maximum limitations for loans, or the employer may establish their own guidelines. Any employer established guideline must not exceed any Internal Revenue Service prescribed guidelines.
As a plan participant, you may be allowed to withdraw a portion of your account to meet specified financial needs (hardship distribution). Any distribution taken for hardship purposes will be subject to federal and state income tax at the participant’s current tax rate, plus an additional 10% penalty for any distribution taken prior to attaining age 59 1/2.
Note: All of the above listed provisions may not be available in your plan. Your plan’s Summary Plan Description will provide details concerning these provisions.
RPA is an independent third party retirement plan administration company based in Atlanta, Georgia that has been administering retirement plans since 1985 across multiple states.
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