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What Are the IRS Guidelines on the 401(a)?

Learn about these less-known retirement plans, such as profit-sharing

While most Americans are familiar with 401(k) plans as retirement-saving vehicles, there are lesser-known retirement and benefit plans. One example is the 401(a) plan, typically offered by not-for-profits, government agencies, and educational institutions, as opposed to private companies. These plans can be customized by the employer and are often offered as a loyalty incentive. In some cases, public employees may be given 401(a) plans in lieu of government pensions.

Key Takeaways

  • 401(a) plans are offered by governmental entities and other public employers like schools and non-profit entities.
  • The terms of a 401(a) plan are set by employers and are highly customizable.
  • 401(a) plans may be available to a select group of employees to foster their loyalty.
  • Employees are often required to enroll in a 401(a) plan, though it is usually not mandatory that they participate.
  • A 401(a) plan is similar to a 401(k) plan, though 401(k) plans are more heavily used in the private sector.

The Internal Revenue Service (IRS) draws upon Section 401(a) of the tax code to formulate rules for the administration of 401(a) plans. These rules are similar to rules set for 401(k) plans, which is a subset of section 401(a).

A 401(a) plan can take many shapes. They can be a profit-sharing plan, money-purchase pension plan, or employee stock ownership plan. The employee contribution amounts are governed by the employers, who must also contribute to the program. Contributions can either be made on a pre-tax or post-tax basis.

A 401(a) plan resembles a 403(b) tax-sheltered annuity plan. Administrators of 401(a) plans must file Form 5500 reports annually with the IRS.

Specific IRS Guidelines

As of 2023, the maximum allowable contribution to a 401(a) plan is $66,000 or 100% of salary, whichever is smaller. This is up from $61,000 in 2022, and these figures exclude the $7,500 potential catch-up for certain participants.

As with most other retirement plans, participants who withdraw from their 401(a) prior to reaching 59½ must pay a 10% early withdrawal penalty. Also, they must begin taking required minimum distributions (RMDs) upon reaching a specific age. Thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the age had increased to 72 from the previous RMD age of 70½. Then, Congress passed the SECURE 2.0 Act, increasing the RMD age to its current level of 73 years old.


Employees with 401(a) plans may not simultaneously partake in 401(k) plans.

Contributions to 401(a) plans can come from a variety of sources, including:

  • Employer contributions that are a fixed dollar amount or salary percentage.
  • Mandatory employee contributions made on a pre-tax basis.
  • Employee contributions that are elective and made on an after-tax basis, up to 25% of total salary.
  • Employer matching contributions.

Who Dictates the Terms of a 401(a) Plan if Not the IRS?

In some cases, because 401(a) plans are so customizable, the terms and conditions are dictated by the sponsoring employer, rather than by specific IRS guidelines. For example, in addition to delineating the investment options available in these plans, employers govern whether employee contributions are voluntary or mandatory, the amount of each employee's contribution, the degree to which that contribution is matched by employer funds, and whether contributions can be made with pre-tax or after-tax dollars.

What Is the 401(a) Contribution Limit for 2023?

The maximum allowable 401(a) limit for 2023 is $66,000. Catch-up contributions are not allowed.

Do 401(a) Contributions Count Toward 401(k) Limits?

No, 401(a) contributions do not count toward contribution limits imposed by 401(k) or similar type vehicles such as 403(b) accounts.

What Is the Difference Between a 401(a) and a 401(k)?

A 401(k) is an employer-managed plan in which the employee makes monthly contributions. The company is not required to make contributions, though many do offer retirement contribution matching. In a 401(a) plan, both the employer and employee usually make monthly contributions. Most often, 401(a) plans are used by government and nonprofit employees while 401(k) plans are used in the private sector.

The Bottom Line

A 401(a) plan is an employer-sponsored money-purchase retirement plan that allows contributions from the employer, the employee, or both. This type of retirement plan is commonly seen in the government and nonprofit sector, and enrollment in a 401(a) plan is often required for employees.

Article Sources
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  1. Internal Revenue Service. "Governmental Plans under Internal Revenue Code Section 401(a)."

  2. Office of the Law Revision Counsel. "U.S. Code: Title 26, Subtitle A, Chapter 1, Subchapter D, Part 1, Subpart A, § 401 Qualified Pension, Profit-Sharing, and Stock Bonus Plans."

  3. MissionSquare Retirement. "401(a) Defined Contribution Plans."

  4. Internal Revenue Service. "Form 5500 Corner."

  5. Mission Square Retirement. "2023 Retirement Plan Contribution Limits (401k, 457 & More)."

  6. Internal Revenue Service. "2023 Limitations Adjusted as Provided in Section 415(d), etc."

  7. Internal Revenue Service. "Topic No. 558 Additional Tax on Early Distributions from Retirement Plans Other than IRAs."

  8. Internal Revenue Service. "Retirement Plan and IRA Required Minimum Distributions FAQs."

  9. U.S. Congress. "H.R.2617 - Consolidated Appropriations Act, 2023." Division T: Section 107.

  10. Internal Revenue Service. "Government Retirement Plans Toolkit."

  11. Internal Revenue Service. "401(k) Plan Overview."

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