401(k) and Profit Sharing Plans

401(k)

A 401(k) plan can be a powerful tool in promoting financial security in retirement. It allows employees to decide how much to contribute to their accounts.

To set up a 401(k) plan for your business, you may purchase a pre-approved plan or consult your benefit plan advisor.


 401(k) Plans for Small Businesses
(.pdf file)

 

 

 
  • Can be set up by any employer other than a state or local government entity
  • Participant's retirement benefits based upon participant’s account balance
  • Allows employees to contribute to their own retirement through salary deferrals, up to $17,0001 and an additional $5,5001 if age 50 or older
  • Although not required, the employer can contribute to an employee’s retirement account
  • The maximum combined employer and employee contributions are the lesser of 100% of an employee’s compensation or $50,0001 or more if catch-up contributions
  • May exclude certain employees from coverage as long as annual coverage tests are met
  • More complex to set up and operate
  • Annual return usually required
  • Must usually satisfy annual nondiscrimination testing
  • Greater design flexibility
  • Plan may allow employees to take loans and hardship withdrawals
  • Immediate vesting in employee's own contributions 
1Dollar limits are for 2012 and are subject to cost-of-living adjustments for future years.

401(k) Plan Checklist to maintain your plan (.pdf file)

 

 

401(k) Plan Fix-It Guide to correct your plan (.pdf file)

 

 

 

 

 ADDITIONAL RESOURCES