401(k) Plans
401(k) Plans are among the most popular retirement plans offered because of their flexibility as well as the tax-deferred savings they offer plan participants and employers:

• Participants can make pre-tax contributions which reduce their current-year taxable income;
• The value of their 401(k) investment grows—tax deferred—until it is withdrawn at retirement age (age 59 1/2) and taxed as ordinary income;
• Employers can, but are not required to, make matching contributions to each employee’s account; these contributions are deductible to the employer and non-taxable to the employee.
• If the plan allows, participants can direct how their 401(k) contributions are invested;
• If participants leave the organization, they can roll their 401(k) money over into another type of tax-deferred account.
• If participants want to withdraw 401(k) funds prior to retirement (age 59 1/2), they may do so for certain IRS-approved situations, but may pay taxes and a penalty to do so.

Most participants can defer up to $15,500 in 2008, or the annual IRS dollar maximum, with employers matching anywhere from 0 to 6% if they choose to do so. Within the limits of IRS rules, employers can set their own vesting schedule for the matching dollars they contribute.

With the exception of government entities and self-employed individuals, almost any type of organization can establish a 401(k) Plan.

There are a number of administrative issues to consider, including annual nondiscrimination compliance testing required by the IRS. To learn more about the details of administering a 401(k) Plan, as well as more in-depth information about the rules of participation, please contact us for a personal consultation.