Rules & Regs
At what age can individuals start making penalty-free withdrawals from their 401ks?
59.5 years old
True or False: Employers are completely absolved of liability once they establish a 401k plan.
False. Employers retain certain fiduciary responsibilities.
What type of 401k plan feature allows participants to contribute after tax money to their 401k?
Roth contributions
True or False: Retirement plan costs are tax deductible.
True. Some of the costs are tax deductible. Employers must be the ones paying to receive the deduction.
Pre-tax contributions are beneficial because...
They immediately reduce a partcipants taxable income. Making it easier to save and allows participants to pull money from their accounts when they are in lower tax brackets.
How much is an individual allowed to save into their 401k plan
2023:
$22,500 under age 50
$30,000 over age 50
2024:
$23,000 under age 50
$30,500 over age 50
True or False: Employers who sponsor 401k plans have a fiduciary duty to act in the best interest of their employees
True. Employers are held the a fiduciary standard and must act prudently and in the best interest of the participants. If they are not experts they must hire one.
Auto-enrollment & Auto-escalation
True or False: Employees are allowed to make contributions to their retirement plans both Pre-Tax and Post-Tax.
True: Although not all plans allow for Roth contributions at the moment this is something that will be changing. All catchup contributions starting are now required to be made on a post-tax basis.
After-tax contributions are beneficial because...
They allow participants to pay the taxes now and benefit from tax free growth and distributions on their money. Can be very beneficial for younger employees and as a estate planning tool.
What is the annual testing that 401k plans are required to do each year?
Nondiscrimination testing
Who is the fiduciary who is responsible for the day-to-day operations of the plan.
401k plan administrator.
This type of plan is designed specifically for small businesses.
SIMPLE IRA Plan
Withdrawals from 401k plans are taxed at what rate?
They are taxed at the individuals personal tax rate and the distributions are treated as ordinary income.
This term describes the process of moving one 401k account to the next.
Rollover
What government agencies are responsible for overseeing 401k plans?
DOL & IRS
To what 3 parties can an employer outsource some of their fiduciary responsibilities?
3(16) Administrator
3(21) Advisor
3(38) Advisor
True or False: Employers can exclude certain employees from their retirement plans.
True. Employers can set eligibility criteria i.e. age, tenure, leased employees- etc.
For new start up plans how much money can an employer contribute (match, profit sharing, etc.) to each individual and still receive a 100% refundable tax credit.
$1,000 per employee up to 50 employees
This type of contribution can help employees save more for retirement but can be subject to a vesting schedule
Employer contribution i.e. match, profit sharing, non-elective
What is the combined total amount that an employee and their employer can put into the employees 401k account?
$69,000
Who is liable for the 401k plan?
Plan fiduciaries. The individuals.
True or False: If an employer decides to contribute to the retirement plan they must give everyone the same amount.
False: Depending on your plan design employers are allowed to contribute different amounts to different employees. Although employers will still have to pass nondiscrimination testing.
Up to how much are employers eligible to receive in tax credits to help offset startup costs.
Employers are eligible for up to $5,000 in credits in each of their first 3 years of starting a plan.
This type of distribution allows for participants to take up to 50% of their account but they must pay it back with interest over a period of no more than 5 years.
plan loan