401(k) Plan Overview

Traditional

There are several types of 401k plans available to employers - traditional , safe harbor and SIMPLE. Different rules apply to each. It is important that you become familiar with your plan so that you understand the special rules that apply to you.. A traditional plan allows eligible employees (employees eligibility depends on company polices to participate in the plan) to make pre-tax elective contribution through payroll deductions.

In traditional plan employees contributes through payroll deduction and that contribution is a pre-tax. In a traditional 401k plan, employers have the option of making contributions on behalf of all participants, making matching contributions based on employees’ elective deferrals, or both. These employer contributions can be subject to a vesting schedule which provides that an employee’s right to employer contributions becomes no forfeitable only after a period of time, or be immediately vested. Rules relating to traditional plans require that contributions made under the plan meet specific nondiscrimination requirements.