Qualified Retirement Plan
Highlights
Sponsor Questions
Selecting a Plan
Need a Change?
Types of Plans
401k Plans
A 401(k) plan is a special type of profit sharing plan that allows employees to voluntarily defer receipt of a portion of their pay and contribute to a retirement plan. A 401(k) plan offers flexible and fully tax deductible employer contributions such as a matching contribution or profit sharing contribution together with tax sheltered growth of plan assets.

The employees will benefit by making pre-tax contributions and with tax-sheltered accumulation of contributions to the plan.

  • Employees elect to make pre-tax contributions to the plan rather than taking the contributions in cash
  • The employee does not pay current federal and California state income taxes on their elective deferrals
  • The participant does pay FICA and FUTA taxes on their contributions
  • Contributions accumulate tax-deferred until withdrawn from the plan
  • Contributions do not incur taxes for capital gains, dividends and interest income as long as the funds remain in the 401(k) plan
401(k) profit sharing plans may offer employee 401(k) deferrals and rollovers, employer profit sharing contributions, matching contributions, top-heavy minimum contributions and safe-harbor contributions.

A matching contribution is an employer contribution based upon 401(k) deferrals made by the employee. If the employee does not contribute, they do not receive a contribution. A profit sharing contribution is made to all eligible participants regardless of whether they contribute 401(k) deferrals.

Pacific Retirement Plans can assist the employer in establishing a 401(k) plan with multiple fund families, daily valuation, Internet and 800-number access. We can evaluate 401(k) testing problems and suggest changes that may permit owner/employee's to make a greater contribution to the plan.

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