AVAILABLE TO
Employees of a company that offers a tax-deferred retirement plan, employer has flexibility to determine and/or change its contributions each year.
HOW IT WORKS
Employer contributes amount, which may vary each year, to each eligible employee's account. Contributions are often discretionary and may be based on company profits.
MAIN FEATURES
Plan design determined by employer. Generally, eligibility criteria can include attainment of age 21 and one year of service. If the plan permits in-service withdrawals, an early withdrawal penalty of 10% on money withdrawn before age 59½ generally applies; for non-5% owners, required minimum distributions begin by later of age 70½ or retirement.
Investments and participation qualifications determined by employer with certain guidelines. Employer contributions can be made up until employer's tax filing deadline (including extensions).
ANNUAL CONTRIBUTIONS
Employer contribution to employees' accounts. The maximum is the lesser of 100% of compensation or $40,000. The $40,000 ($41,000 in 2004) limit will be indexed $1,000 increments based on cost of living adjustments.
ADVANTAGES
The above review is meant to serve as a general overview only, other requirements apply. You should consult a tax advisor for applicability to specific facts and circumstances. You should also always review any materials provided by your employer to learn more specific information about plan(s) in which you are eligible to participate.