401(k) Plans

401(k) plans are a defined contribution plan that allow pre-tax employee contributions. Employers can choose to match an employee’s contribution to the 401(k) plan. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.

CDSA-401k

NEW! 401k Hardship Distribution Changes effective 1-1-19

 

Roth 401(k) Plans

The greatest advantage of a Roth 401(k) is that money grows tax free with no taxation at the time of withdrawal (if the account holder satisfies the 5 year minimum period and has a qualifying distribution event). The annual individual savings deferral is limited by law to $18,500 for 2018. For individuals age 50 and older, an additional catch-up contribution of $6,000 is allowed in 2018.

All employees who qualify for a traditional 401(k) account are also eligible for a Roth 401(k) account.

At retirement or employment termination Roth 401(k) funds can be rolled over into a Roth IRA.

Safe Harbor 401(k) Plans

Safe Harbor 401(k) plans are like traditional 401(k) plans, but require fully vested safe harbor contributions from the employers. Safe Harbor 401(k) plans automatically pass two of the nondiscrimination tests, making it a popular plan among small companies. The annual individual savings deferral is limited by law to $18,500 for 2018. For individuals age 50 and older, an additional catch-up contribution of $6,000 is allowed in 2018.

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