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401(k)
Sign in to saveIn the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their paychecks, and may be matched by the employer. This pre-tax option is what makes tradition 401(k) plans attractive to employees, and many employers offer this option to their full-time workers. 401(k) payable is a general ledger account that contains the amount of 401(k) plan pension payments that an employer has an obligation to remit to a pension pla
Article
31 sectionsContents
- History
- Taxation
- Traditional
- Roth
- Withdrawal of funds
- Loans
- Required minimum distributions (RMD)
- Required distributions for some former employees
- Rollovers
- Direct rollovers
- Traditional to Roth conversions
- Technical details
- Contribution deferral limits
- Contribution deadline
- Highly compensated employees (HCE)
- Automatic enrollment
- Fees
- Top-heavy provisions
- Plans for certain small businesses or sole proprietorships
- Rollovers as business start-ups (ROBS)
- Other countries
- Criticisms and proposed reforms
- Risk of loss
- Choosing investments
- Inequality
- Participation
- Insufficiency of retirement savings
- See also
- Notes
- References
- External links
In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their paychecks, and may be matched by the employer. This pre-tax option is what makes tradition 401(k) plans attractive to employees, and many employers offer this option to their full-time workers. 401(k) payable is a general ledger account that contains the amount of 401(k) plan pension payments that an employer has an obligation to remit to a pension plan administrator. This account is classified as a payroll liability, since the amount owed should be paid within one year.
There are two types of 401(k) plans: traditional and Roth. For Roth accounts, contributions and withdrawals have no impact on income tax due to contributions originating from post-tax income. For traditional accounts, contributions may be deducted from taxable income and withdrawals are added to taxable income. There are limits to contributions, rules governing withdrawals, and possible penalties.