401k plans

Question

401k plans

Quizplus · Accepted Answer

401k plans are based on a salary reduction arrangement, in which an employee elects to have a certain amount of their salary contributed to the plan. This contribution can be matched by the employer, but it is not solely an employer contribution plan. Profit sharing plans, on the other hand, are employer contribution plans that distribute a portion of the company's profits to the employees. 401k plans also have a limit on the amount that can be contributed each year, which is currently $19,500 for those under age 50 and $26,000 for those 50 and older. The employer contribution limit is also limited to 25 percent of the employee's salary, but only in certain circumstances such as if the plan is a Safe Harbor 401k plan.

401k Plans