401(k) and Qualified Plans: Conclusion

  1. 401(k) and Qualified Plans: Introduction
  2. 401(k) and Qualified Plans: Types of Plans
  3. 401(k) and Qualified Plans: Eligibility Requirements
  4. 401(k) and Qualified Plans: Contributions
  5. 401(k) and Qualified Plans: Distributions
  6. 401(k) and Qualified Plans: Conclusion

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 for defined-benefit plans 
  • Varieties of qualified defined-contribution 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/or employee contributions, depending on the type of plan.
  • 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 $55,000.
  • Distributions before an employee reaches the age of 59½ are taxed an additional 10% penalty, unless the employee qualifies for an exception.