Financial/Retirement Professionals » Business Retirement Professionals

401(k) Features

Eligibility is normally restricted to age (no greater than 21), length of service requirements (no greater than 2 years, 1 if vesting is used), and class of service requirements.

The employee and the employer can make contributions into a 401(k) plan. Employee contributions normally occur through payroll deductions, specifically when contributions are directed into the plan on a pre-tax basis.

While all plans must offer pre-tax deferral, some also allow their employees to defer a portion of their pay on an after-tax basis as well.

Contributions from an employee's paycheck must be made no later than the 15th day after it is deducted from pay (The Department of Labor (DOL) requires that deferrals must be contributed as soon as they are separated from operating expenses if this is sooner than the 15th of the following month that is when the contribution is due). Employer contributions must be made by the company's tax filing deadlines plus extensions.

Vesting is based on a schedule of eligibility to determine the percentage of employer contributions that the employee is entitled to upon termination. Employee contributions are always 100% vested.