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 But the tax reform act of 1986 limited their use as short-term savings plans by imposing a 10% penalty on all money withdrawn before retirement.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
Provision by an employer for the economic and social welfare of employees. Generally include: pension plans for retirement; group life insurance for death; group health insurance for ...
Possibility of a reduction in value of an insurance instrument resulting from a decrease in the value of the assets incorporated in the investment portfolio underlying the insurance ...
Inability to divide a cash value life insurance policy into a savings element and a protection element because, in theory, if the policyowner withdraws a portion or ail of the cash value, ...
each individual has an unlimited insurable interest in his or her own life, and therefore can select anyone as a beneficiary. parent and child, husband and wife, brother and sister have an ...
Excess funds above the amount required to establish legal reserves for the policies in force. These excess funds are generated as the result of mortality savings, excess interest earned on ...
Same as term Fair access to Insurance Requirements: insurance that grew out of the urban demonstrations and riots of the 1960s. Because of the deteriorated social and economic circumstances ...
Modified endowment insurance policy under which the insured receives one-half the death benefit as the maturity value of the policy. ...
Relationship of the frequency of illness, sickness, and diseases contracted by individual members of a group to the entire group membership over a particular time period. ...
Performance of managerial and clerical functions related to an employee benefit insurance plan by an individual or committee that is not an original party to the benefit plan. In selecting ...
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