Which of the following statements about 401(k)plans are true?
I. They are defined benefit plans.
II. They allow employer and employee contributions.
III. Earnings accrue tax-free during the employee's working years.
IV. They allow employee discretion in asset allocation.
V. They always have minimum guaranteed rates of return.

Question

Quizplus · Accepted Answer

I. is false, as 401(k) plans are defined contribution plans, not defined benefit plans.
II. is true, as both the employer and employee can contribute to a 401(k) plan.
III. is true, as the earnings on the contributions made to a 401(k) plan accrue tax-free until the employee withdraws the funds.
IV. is true, as employees have the ability to choose how to allocate their contributions among a selection of investment options.
V. is false, as there is no minimum guaranteed rate of return in a 401(k) plan.

Which of the Following Statements About 401(k)plans Are True