What contributions are made to my 401(k) Plan account?
Your employer may make an annual contribution to the plan based on your earnings for the year. This contribution is discretionary, and the Employer will decide each year whether or not to make a contribution and the amount of the contribution.
You may voluntarily elect to defer a portion of your pay, before any income taxes are withheld, and have it contributed to the plan. These contributions are called elective salary deferrals in the law, but are also commonly called 401(k) contributions.
Also, your employer may match your elective deferral contributions based on a formula such as 50% of the elective deferral. The matching contributions may be limited to a maximum dollar amount or maximum percent of pay. If so stipulated in the Plan’s Adoption Agreement, the Employer may change the amount of the match each year, or have a match one year and not another. Whether or not the Employer will match deferrals, and how much will be matched, should be communicated to you each year.How will the Plan affect my W-2 Form?
Since the money you defer goes directly into the Plan, the taxable total on your W-2 will notinclude the amount you elect to contribute to the Plan. You will nothave to pay taxes on this money until it is distributed back to you. Any matching and profit sharing contributions are in additionto your regular salary or wages as well and are also not taxed until you receive your benefits. These contributions do not show on your W-2 at all.Does the Plan affect my Social Security benefits?
No. There is no effect on Social Security benefits or taxes.Can I use any of the accumulated funds while I am still employed?
If loans are allowed under the Plan’s Adoption Agreement, (see your Plan Administrator for details), then you can borrow up to 50% of your vested benefit under the plan. Repayment must be in equal installments over five years or less, unless the loan is for purchase of your primary residence. The loan must bear a “market” interest rate.
You may be able to receive a distribution in a form other than a loan for various reasons. This will be governed by the Plan’s Adoption Agreement. Once the Plan is adopted, you will receive a Summary Plan Description which will explain the Plan in detail.
What benefits are available under the retirement plans?
These plans provide for both employer contributions and tax deferred savings for you. The accumulated contributions and earnings are available to you at retirement, or if you separate from service with the employer for any reason before retirement age.How will the benefits be paid when I retire or separate from service?
If your vested benefits are $5,000 or less when you retire or separate from service, your benefit will be paid in a lump sum. Otherwise, you may elect from several options on how you wish to have your benefits paid. These include a lump sum, a series of installment payments for a specific period of time, or a combination of these. If you are married, and the vested benefits are more than $5,000, your spouse must consent to the distribution.What benefits are paid when I die?
At the time of your death, all contributions and earnings credited to your account, less any outstanding loans or withdrawals, will be paid to your designated beneficiary. If you are married, your spouse must be your beneficiary unless your spouse consents in writing to the designation of another beneficiary.