Questions about 401(k) Plans
Frequently asked questions and answers about 401(k) plans from experienced
professionals at Retirement Alliance.
Most common question: How do I access my account as plan
sponsor?
Contact your Retirement Alliance Plan Service Specialist for log in information.
Others questions:
Is there a maximum amount that employees may invest?
Yes, see Hot Topics for current year limits. Highly compensated employees
may be limited by the ADP tests that apply to the specific plan. Please refer
to most recent annual valuation for these limitations.
How do the employees' contributions affect their
income taxes?
Taxable income is reduced by the amount that is contributed to the plan. For
example, an employee with a salary of $25,000 who contributes $2,000 would have
a W-2 income of $23,000.
Do employees pay taxes on the earnings in their
accounts?
Yes, but only when they actually receive distributions from their account,
most likely at retirement.
When may employees begin to receive benefit payments?
At retirement, termination of employment, disability or death, or in the event
of an extreme financial hardship if allowed by the provisions of the plan.
May employees stop and re-start contributions?
Yes. Employees have the option of ceasing contributions at any time. Refer
to the plan documentation for entry dates to re-enter the plan.
May employees change the amount of their contributions?
Yes they may, at the times specified by the plan document.
Do the employees' deferrals affect their pension or
Social Security contributions or benefits?
No. Social Security income is calculated prior to 401(k) deferral.
When do contributions become vested?
Employee contributions vest immediately. Any employer contributions are subject
to the vesting schedule defined by the plans document.
What happens if an employee terminates employment?
Employees may elect to receive the value of their accounts under any of the
available benefit options. Employee accounts with more than $5,000 are eligible,
at the discretion of the employee, to leave their account until retirement.
Contact your plan administrator for further details.
How does the employer contribution work?
Employers may contribute in various ways, depending on the type of plan. Please
refer to your plan document for details.
What if I need more information?
Contact a Retirement Alliance Plan Service Specialist regarding tailoring the
parameters of your own 401(k) plan in the manner that best conforms to the
needs of your firm.
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