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 But the tax reform act of 1986 limited their use as short-term savings plans by imposing a 10% penalty on all money withdrawn before retirement.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
Combination of several coverages to protect the insured. For example, the comprehensive health insurance policy combines the basic hospital plan with major medical insurance to cover ...
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Unexpected claims occurring above the expected claims for which a contingency reserve is maintained. ...
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Document used to sign up employees for plans such as salary savings, life insurance, or other employee benefits. ...
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