• When can I begin to participate?
• How does an employee sign up for the plan?
• Can an employee "drop out" of participation and then re-enter after dropping out?
• How much can an eligible employee contribute to the 401(k) Plan?
• Is there a minimum contribution amount?
• What types of contributions are allowed?
• Are any taxes paid on the money contributed by employees?
• How do salary deferrals or pre-tax contributions affect my income taxes?
• Are Company matching contributions required to be part of a 401(k) Plan?
• How can participants get money out of their 401(k) account?
• How is this money paid?
• What happens to my 401(k) account if I leave my company?
• What is the penalty if I take money out of my 401(k) before I'm 59 1/2?
• Can I roll over the 401(k) money from my prior company into my new company's 401(k) Plan?
• Can I roll over my 403(b) account over into a 401(k) account with my new employer?
• Can I request a loan from my 401(k) Plan?

When you become eligible. To determine if you are eligible, you will need to know your plans specific eligibility requirements. Ask your company's human resources or benefits representative for information about your plan.

The plan defines the day an employee can enter the plan once the employee is eligible by meeting age and service requirements. Examples of these "entry dates are, the first day of the payroll period, the first day of each month, or the first day of each calendar quarter. The employer will notify employees as they become eligible to participate in the plan and provide the employee with instructions to log on to the website and complete the required steps. Eligible employees should log onto the website, using their default username and password. They will be guided through a 3-step process, which includes an opportunity to personalize their username and password.
Once the employee has completed the steps he/she is required to print, complete and return to the employer an Enrollment/Beneficiary form. The Enrollment/Beneficiary form authorizes the employer to make payroll deductions in the amount the employee elects. The beneficiary designation identifies the primary and secondary beneficiaries of the employee's plan benefits should he/she die prior to taking his money out of the plan.

Yes. All employees who have met any age and service requirements and are in an eligible class of employees are technically considered "participants" even if they do not elect to participate in salary deferrals. Once an employee is an eligible participant, he/she can begin salary reductions or change the amount of salary reductions at specified time throughout the year. Most plans have quarterly change dates, that is, once a quarter employees can begin payroll deductions, change their percentage, or re-enroll if they have previously dropped out. Dropping out can generally be done at any time during the year.

Each eligible employee elects to have an amount of his compensation contributed to the plan. Under most 401(k) plans, employees can defer an annual pre-tax limit of $23,000.00 Note: There are some Sections of the IRC that may further reduce the amount an eligible employee may contribute to the plan.

There is no federally imposed minimum contribution amount, however, the may be a minimum specified by the rules of your particular plan.

A 401(k) Plan can accept both pre-tax and after-tax contributions, which may include salary deferrals, commissions, bonuses, and other types of compensation. Most employers allow pre-tax contributions as defined by salary, commissions, and bonuses (i.e. W-2 Income), but it is rare that employers allow after-tax contributions.

Yes. Contributions made by employees are treated as wages for purposes of Social Security and Medicare employment taxes, as well as unemployment taxes. Some states and local municipalities may also include these amounts as wages for tax purposes. However, they are exempt from Federal Income Taxes until distributed to the employee.

Each payroll period, the amount the employee has elected to contribute to the plan is automatically deducted from the employee's paycheck and deposited to the plan by the employer. The amounts deferred by the employee are subject to FICA and FUTA taxes. However they are not subject to Federal, State, or local income taxes, except in Pennsylvania. Therefore a 401(k) Plan is an ideal way for an employee to reduce his taxable income while saving for retirement. Earnings on contributions to the plan also accumulate on a tax-deferred basis.

No. Matching contributions are optional. However, many employers elect to incorporate a matching contribution provision in the plan. This is usually done for a variety of reasons, including: to attract and retain employees, to remain competitive with industry standards, to encourage eligible employees to participate under the plan, and/or for tax incentive purposes. If the employer offers a matching contribution, the employer determines what the matching ratio will be: for example, he may contribute $.25, $.50, or $1 for each $1 an employee defers. He also may elect to match deferrals only up to a certain percentage of the employee's compensation. For example, the plan may allow employees to defer up to 10% of compensation. The employer match, however, may be made only on deferrals up to 6% of compensation. The matching ration can also be tiered, for example, $1 match per $1 deferral up to 6% of compensation and $.50 match per $1 of deferrals in excess of 6% of compensation. It is important that the combination of salary deferrals and employer contributions do not cause individuals or the plan to exceed established limits.

Generally and employee can get money out of the account if one of the following occurs:

1. Termination of employment
2. Retirement
3. Disability
4. Death

An employee may also be able to borrow against their account balance if your plan allows for loans. Additionally, the employee may be able to get money out of the account if he/she has encountered financial hardship

If the withdrawal is paid directly to the participant, Federal Tax will be withheld and a 10% premature distribution penalty may apply. If the withdrawal is "rolled over" to an IRA or other Qualified Plan, neither the tax nor penalty applies.

There are three options for you to decide what to do with your 401(k) money after you leave your company.

1. Leave your money in your 401(k) account. If your vested account balance is equal to or greater than $5,000, and you are under your plans normal retirement age, you can leave your money in your 401(k) account. Taxes will not be due until you withdraw money out of your account.
2. Rollover - you can roll your vested account balance into your new employer's 401(k) Plan or into an IRA.
3. Lump Sum Distribution - You can take your money as cash, but keep in mind that you will owe all applicable taxes, including 20% mandatory withholding, and a 10% early withdrawal penalty, (unless you leave your company during the year you turn 55 or later).

What is the penalty if I take money out of my 401(k) before I'm 59 1/2?

There is a 10% early withdrawal penalty of the untaxed money you withdraw, plus a mandatory 20% withholding. There are exceptions to these penalties where you may not have to pay the penalties and they are:

1. If you become totally disabled.
2. If you die, and your beneficiary collects the money.
3. If medical expenses have put you in debt. The medical expenses must exceed 7.5 % of your adjusted gross income.
4. QDRO - Qualified Domestic Relations Order, if you are required by a court order to give the money to your divorced spouse, a child, or dependent.
5. Separation for service - If you have been separated from service during the year you turn 55 or later.

Any money withdrawn for the above reasons would still be subject to applicable federal, state and local income taxes.

Yes, providing your new company's 401(k) plan allows rollovers. Please ask your prior company's human resources or benefits representative for rollover instructions.

Yes, effective January 1, 2002 rollovers from 403(b) accounts are allowed.

Yes, loans are allowed up to $50,000 or 50% of your vested interest. The minimum loan shall be $1000 and shall only be made for hardship or financial necessity.