401(k) FAQ's


401 (k)

Defined contribution retirement plan qualified under the Internal Revenue Code that allows employees to contribute pre-tax dollars through a salary deferral arrangement.

Can I withdraw my money if I need it?

Each plan is different. You may be able to withdraw contributions due to financial hardship.  Some plans also have loan provisions that let you borrow from your account.  Many plans have in-service distributions options once the employee turns 59 1/2.  Please check your Summary Plan Description (SPD) for details of your plan features.

Does an employer have to contribute each year?

No, Profit Sharing Plans are discretionary. The employer can decide from year to year how much, if any, the contributions will be.  Many 401(k) and 403(b) plans have a stated match that they have to follow from year to year.  The match parameters can be found in the Summary Plan Description (SPD) or obtained from your plan sponsor.

How much can an employee contribute?

 Under current law, the limit is 100% of pay not to exceed $18,000 in 2017, with a catch-up contribution of $6,000 for employees 50 years of age or older.  Some plans will limit the percentage of your pay that can be deferred.

How much can an employer contribute?

Under a Profit Sharing Plan, an employer can generally contribute up to 25% of gross pay, per employee, per calendar year.

How much must the employee contribute?

Employees are not forced to contribute to a qualified plan, however to take full advantage of an employer's match an employee will have to contribute to the plan.  Information about your plan's current match can be found in the SPD or obtained from the plan sponsor.  The plan sponsor or plan advisor can describe the advantages of tax deferred contributions to a qualified plan. 

How often can I make changes to my investments?

Depending on your plan's provider, you may make changes to your investments daily.  Please see Resources for links to your 401 (k) Plan Provider for details.

Profit Sharing Plan

Defined contribution retirement plan qualified under the Internal Revenue Code that allows employers to contribute to an employee's retirement account.

Roth 401 (k)

Roth contributions are special after-tax contributions in the 401 (k) plan. For plans that allow Roth contributions, the employee can contribute before tax, Roth after tax or some combination of both. Roth contributions grow tax-deferred and may be tax free when withdrawn at retirement.

For more details on Roth 401 (k)'s please refer to your Plan Provider Link.

Simple IRA

Allow participant tax-deferral, flexible employer contributions and minimal paperwork.  Businesses with less than 100 employees are eligible.

What is a catch-up contribution?

Catch-up contributions allow employees (you) to “catch-up” for earlier years that you were unable to contribute to 401 (k) plans. You must be 50 years of age or older to be able to make this extra contribution.  The catch-up contribution is currently $6,000 (2017) and is in addition to the annual limit.

What is a vesting schedule?

Vesting is “rights to” or the percentage of an employee's account that has been earned. Vesting schedules are based on a “years of service” formula.  There are several different vesting schedules a plan can choose from and your vesting schedule will be stated in the Summary Plan Description (SPD).   For example, many Profit Sharing Plans have a 6 year vesting schedule as follows:

0-2 year 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
When do I have to start taking my money?

Under normal situations, you are required to start taking minimum distributions by age 70 ½.