Which of the following is true with regard to 401(k) plans?
A) If an employee leaves the job, his/her 401(k) plan expires.
B) These plans give all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional healthcare or vacation time.
C) A 401(k) plan is a plan set up by the organization in which employees directly deposit money from their paycheck.
D) Employee Retirement Income Security Act (ERISA) makes it mandatory for employers to offer a pension or 401(k) plan.
E) These plans are freely available and do not create an additional administrative cost for the company.

Question

Quizplus · Accepted Answer

A 401(k) plan is a retirement plan set up by the organization in which employees can voluntarily contribute a portion of their salary to the plan, often with an employer match.

Option A is incorrect as employees can typically roll over their 401(k) plan to a new employer's plan or an individual retirement account (IRA) when leaving a job.

Option B is incorrect as flexible benefits are typically offered through a cafeteria plan, which is separate from a 401(k) plan.

Option D is partially incorrect as ERISA does mandate certain requirements for employers offering retirement plans, but it does not specifically require a pension or 401(k) plan.

Option E is incorrect as offering and administering a 401(k) plan can create additional administrative costs for the company.

Which of the Following Is True with Regard to 401(k)