Any pretax amount elected by an employee as a plan contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Question

Quizplus · Accepted Answer

This statement is true. The amount elected by the employee to be contributed to a 401(k) plan before taxes is not included in their gross income for the year, as long as it does not exceed the statutory limit. Additionally, these contributions are immediately vested, meaning the employee has full ownership and control over these funds from the start.

Any Pretax Amount Elected by an Employee as a Plan