Section 401 (k) Plan (salary Reduction Plan)
Definition of "Section 401 (k) plan (salary reduction plan)"
Employer sponsored retirement savings program named for the section of the Internal Revenue Code that permits it. These plans allow employees to invest pre-tax dollars that are often matched in some portion by employers. Because of their flexibility, 401 (k) s became a popular employee benefit during the 1980s. But the tax reform act of 1986 limited their use as short-term savings plans by imposing a 10% penalty on all money withdrawn before retirement. It also reduced the maximum annual contribution from $30,000 to $7000 and tightened nondiscrimination rules. Employees may still borrow the money, however, and pay themselves interest.
Popular Insurance Terms
Eligible rollover distribution that is paid directly from an employee's employee benefit insurance plan to the employee's individual retirement account (IRA) or to another plan maintained ...
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Person who engages an agent or broker for advice and possible purchase of insurance. ...
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Time limit on the deferred ownership of property such that, 21 years after the property owner dies, the deferred ownership of that property terminates. ...
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Actual price paid for property when it was acquired. The original cost might apply to a piece of jewelry, to a piece of equipment, or to a building. For insurance purposes, original cost is ...
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