401K Regulation

If you're tired of seeking out 401K Regulation help, then you're sure at the right page! This place is chock-full of tips and explanations on how 401k's work plus there are all kinds of tips, tricks and FAQ's you can go over and hopefully learn from. We hope you find this page to be helpful and informative for you! Choosing the right retirement program can be a bit overwhelming if you don't know what to look for, so we've set this page up with as much 401 k information as we could get for you and made sure it's painless and easy. Here you go...

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Reasons why 401ks are a smart idea:

Most of your plan's investment choices are managed by professionals

Many of the investment options in your company's 401(k) plan are mutual funds. By investing in mutual funds, you place your money in the hands of a highly experienced team of investment professionals. Most funds are managed by a portfolio manager, and a global team of dedicated analysts works behind the scenes to provide in-depth research and analysis on thousands of companies, securities, and other investment opportunities. They do the work, so you don't have to.
Your plan may also include other investment options that aren't actively managed, such as index funds, funds of funds, or options other than mutual funds, such as a company stock fund or a commingled pool. Please see your plan materials for more information.

401K Regulation Tips:

More of the IRS regulations, are the so-called "415 limits." First, contributions can only be made on pay up to a certain amount, which changes annually. The 2005 limit is $210,000. The IRS further limits the total amount for defined contribution plans (i.e., money put into 401(k) plans, 401(a) plans, or pension plans) each year to the lesser of 100% of annual compensation, or some magic number. For 2005, the magic number is $42,000. Annual compensation is defined as gross compensation for the purpose of computing the limitation. This changes an earlier law; a person's annual compensation for the purpose of this computation is no longer reduced by 401(k) contributions and salary redirected to cafeteria benefit plans.

Terms - Definitions:

Plan Sponsor: The person (typically the employer) who is responsible for adopting the plan and sponsoring it for the benefit of the employees.

Class B Fund: Mutual fund investments that generally charge a back-end load that declines with the amount of time the person holds the investment.

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Rules you need to know about 401(k):

Tax on early distributions.
If a distribution is made to a participant before he or she reaches age 59½, the participant may be liable for a 10% additional tax on the distribution. This tax applies to the amount received that the employee must include in income.

Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances:

*Made to a beneficiary (or to the estate of the participant) on or after the death of the participant.
*Made because the participant has a qualifying disability.
*Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the participant or the joint lives or life expectancies of the participant and his or her designated beneficiary. (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period.)
*Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55.
*Made to an alternate payee under a qualified domestic relations order (QDRO).
*Made to a participant for medical care up to the amount allowable as a medical expense deduction (determined without regard to whether the participant itemizes deductions).
*Timely made to reduce excess contributions.
*Timely made to reduce excess employee or matching employer contributions.
*Timely made to reduce excess elective deferrals.
*Made because of an IRS levy on the plan., or
*Made on account of certain disasters for which IRS relief has been granted.

Reporting the tax. To report the tax on early distributions, a participant may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

What is a 401(k)?

A 401(k) is a type of retirement plan that allows employees to save and invest for their own retirement. Through a 401(k), you can authorize your employer to deduct a certain amount of money from your paycheck before taxes are calculated, and to invest it in the 401(k) plan. Your money is invested in investment options that you choose from the ones offered through your company's plan. The federal government established the 401(k) in 1981 with special tax advantages, to encourage people to prepare for retirement. They get their catchy name from the section of the Internal Revenue Code which established them (you guessed it, section 401(k)).

**Disclaimer** The information on this page is as accurate as we could get it but is meant for information purpose only. It's not meant to be legal advice in which you use to make financial decisions. For any legal or financial matters, you should seek out a certified 401k or investment company or individual.

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