Intro to Traditional 401(k)s
With the available tax-deductions for your business, it’s a valuable part of your benefits package. With the tax-deferral and growth potential for your employees, it can be a high-value benefit for their futures.
There’s no time like now to make sure you’ve got the right plan working for your business. Get the right company working for you – COUNTRY Trust Bank®. Get in touch with a local COUNTRY Financial representative to set the wheels in motion.
Who it's for
Sole Proprietor, Not-For-Profit, Incorporated
A 401(k) might be a good choice if you want a retirement plan that allows participants to contribute pre-tax money with tax-deferred earnings and your company is an incorporated business, a self-employed business, or a not-for-profit organization.
How it works
It’s no secret that 401(k)s are the most popular type of business retirement plan available. Here’s some 401(k) information to explain why.
If your employees decide to participate, they can choose what percentage of their compensation they want to contribute to the plan, up to a set annual limit. For 2016, total contributions can be 100% of compensation up to $18,000. If they’re over age 50, they can contribute an additional $6,000 annually.
Contributions by owners and highly compensated employees may be limited, based on participation by other employees. If that’s an issue, a Safe Harbor 401(k) might be worth considering.
As the employer, you have the option to offer a match. That’s a tax-deductible contribution to the participants’ accounts that match their contribution up to a certain dollar amount or percentage of compensation.
The overall maximum employee/employer contribution per eligible employee in 2016 is 100% of compensation up to $53,000. Participants age 50 and older can make an additional catch-up contribution of $6,000 annually.
Employee participation rules
There are a couple of rules governing who can participate in the plan. Generally, employees who are 21 years old and have worked for you for over one year (minimum of 1,000 hours in that year) are eligible to participate.
Can employees take loans from their 401(k) plan?
When working with COUNTRY Trust Bank to design your plan, you have the option to allow participants to take loans from their accounts. The money is repaid at an interest rate based on the current lending environment. The repayments and interest are credited back to the participant’s account.
Loans vs. withdrawals
Instead of a loan, participants can generally withdraw money from the plan for the following reasons: retirement, disability, death (beneficiary withdrawal), termination of employment or financial hardship.
Applicable taxes will be assessed and a possible 10% tax penalty may apply.
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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. Please see our Terms & Conditions for more information about COUNTRY Trust Bank and its affiliates.
COUNTRY Financial® and our representatives cannot give tax advice. Any information we provide reflects our understanding of current tax laws, which are subject to change and reinterpretation. See your tax advisor regarding your personal circumstances.