401(a) Plan

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DEFINITION of '401(a) Plan'

A money-purchase retirement savings plan that is set up by an employer. The 401(a) plan allows for contributions by the employee, the employer, or both. Contribution amounts, whether dollar-based or percentage-based, eligibility, and vesting schedule are all determined by the sponsoring employer.

Funds are withdrawn from a 401(a) plan through lump-sum payment, rollovers to another qualified plan, or through an annuity.

BREAKING DOWN '401(a) Plan'

Employers are able to create multiple 401(a) plans, each with different eligibility criteria, vesting schedules and contribution amounts. For this reason, the 401(a) plan is commonly used by employers to create inventive programs to help retain employees.

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RELATED FAQS
  1. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  2. What are the IRS guidelines on the 401(a)?

    Because of the customizable nature of 401(a) plans, the Internal Revenue Service (IRS) has few hard-and-fast regulations ... Read Full Answer >>
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    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
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    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
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