401(k) Plans

Plans with a 401(k) provision allow a participant to contribute or “defer” a portion of his or her own compensation to the plan for investment.

Deferrals are limited to $17,000 annually and participants who are age 50 or older may defer an additional $5,500 (limits for 2012).

Generally, 401(k) deferrals are not subject to income tax until the deferrals (and investment earnings) are distributed to participants.

Some 401(k) plans allow participants to make after-tax deferrals known as Roth 401(k) contributions.

A Roth 401(k) contribution and the investment earnings on the contribution are not subject to income tax upon distribution.

 

Contact us today if you are interested in setting up a defined contribution plan with a 401(k) feature, or if you’d like to add a 401(k) feature to your existing profit sharing plan.