If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

Question

Quizplus · Accepted Answer

This statement is false. A Section 401(k) plan that allows for employee contributions from their compensation is still considered a "qualified" plan as long as it meets certain requirements, such as nondiscrimination testing and contribution limits.

If a Section 401(k) Plan Allows an Employee to Choose