401(k) And Qualified Plans: Conclusion
By Denise Appleby
A qualified plan is established by an employer to provide retirement benefits for employees and their beneficiaries. Qualified plans can come in a few different flavors. Let's recap:
A qualified plan is established by an employer to provide retirement benefits for employees and their beneficiaries. Qualified plans can come in a few different flavors. Let's recap:
- A qualified plan may be a defined-benefit plan or a defined-contribution plan.
- Retirement benefits are based on compensation, years of service and age.
- Varieties of qualified plans include profit-sharing or stock-bonus plans, money-purchase pension plans, 401(k) plans, age-weighted plans and employee stock ownership plans (ESOPs).
- Any business, including sole proprietorships, partnerships, corporations and government entities may adopt a qualified plan.
- A qualified plan may be funded with employer contributions and employee contributions.
- Employee compensation in excess of the compensation cap may not be considered for the purposes of making plan contributions.
- An employer may contribute up to 25% of compensation to each eligible employee's account provided the contribution does not exceed $49,000.
- Distributions before an employee reaches the age of 59.5 are taxed an additional 10%, unless the employee qualifies for an exception.
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Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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