What You Should Know About 401k Plans
Bits of What You Probably Should Know of 401 (k) Plans
--- The term 401 (k) is one that is heard quite often in today's. Most people know that it has something to do with retirement, but few young people know exactly how 401 (k) plans work or why they are becoming more and more popular. Additionally, many people who have 401 (k) plans may not know all the details of how they work, how to get the most out of their plan, and how to keep their money safe. In reality, everyone in the business world should be aware of the details and advantages of having and managing a 401 (k) type savings plan, as it is becoming one of the most popular ways to save for retirement in the United States and many other countries. First, it is imperative to understand the basics of the 401 (k). By definition, a 401(k) plan is an employee funded retirement savings plan that is set up and sponsored by the employer. They are considered individual account plans because each participant's benefit is the value of a separate personal account (401 (k) - Wikipedia). All 401 (k) plans are funded by employee contributions and usually also include matching contributions from the company. The history of the 401(k) plan begins with an amendment to the Internal Revenue Code (IRC) by Congress which added section 401(k), after which the plan is named. The Revenue Act of 1978 added provisions to the Internal Revenue Code, which included allowing the use of "salary reductions" as a source of plan contributions (McDonnell, 1). Basically, this meant that employees could defer part of their salary into their account, also decreasing their taxable income. The law went into effect in January of 1980 and more regulations were issued in 1981. Shortly thereafter, many companies started the process of adopting 401(k) plans and, by the mid 1980s, nearly half of all large firms already had or were considering 401(k) plans (McDonnell, 1). One of the first companies to begin planning to adopt the 401 (k)
--- The term 401 (k) is one that is heard quite often in today's. Most people know that it has something to do with retirement, but few young people know exactly how 401 (k) plans work or why they are becoming more and more popular. Additionally, many people who have 401 (k) plans may not know all the details of how they work, how to get the most out of their plan, and how to keep their money safe. In reality, everyone in the business world should be aware of the details and advantages of having and managing a 401 (k) type savings plan, as it is becoming one of the most popular ways to save for retirement in the United States and many other countries. First, it is imperative to understand the basics of the 401 (k). By definition, a 401(k) plan is an employee funded retirement savings plan that is set up and sponsored by the employer. They are considered individual account plans because each participant's benefit is the value of a separate personal account (401 (k) - Wikipedia). All 401 (k) plans are funded by employee contributions and usually also include matching contributions from the company. The history of the 401(k) plan begins with an amendment to the Internal Revenue Code (IRC) by Congress which added section 401(k), after which the plan is named. The Revenue Act of 1978 added provisions to the Internal Revenue Code, which included allowing the use of "salary reductions" as a source of plan contributions (McDonnell, 1). Basically, this meant that employees could defer part of their salary into their account, also decreasing their taxable income. The law went into effect in January of 1980 and more regulations were issued in 1981. Shortly thereafter, many companies started the process of adopting 401(k) plans and, by the mid 1980s, nearly half of all large firms already had or were considering 401(k) plans (McDonnell, 1). One of the first companies to begin planning to adopt the 401 (k)
Cited: 401 (k) - Wikipedia. April 5, 2007. The Wikimedia Foundation. April 6, 2007 http://en.wikipedia.org/wiki/401(k) The basics of a 401(k) plan BBC News. January 14, 2002. Regulators probe Enron stock selloff. April 12, 2007. http://news.bbc.co.uk/1/hi/business/1758345.stm Enron - Wikipedia History of the 401K Retirement Plan. iRetire.info. April 11, 2007. http://www.iretire.info/401k-accounts/401k-history.html IRC 401(k) Plans. Internal Revenue Service. April 6, 2007http://www.irs.gov/retirement/article/0,,id=120298,00.html Invest in Your Company Lauricella, Tom. August 5, 2006. The 401(k) of the Future. April 12, 2007. http://webreprints.djreprints.com/1523780224916.html Life Advice About 401(k) Plans McDonnell, Ken. February 2005. History of 401(k) Plans: An Update. Employee Benefit Research Institute. April 9, 2007. http://www.ebri.org/pdf/publications/facts/0205fact.a.pdf Neiters, Ed Whitehouse, Herbert A. Toward a More Complete History: The Origin of the 401k. April 12, 2007. http://www.401khelpcenter.com/401k/whitehouse_origin_of_401k.html Woodard, Dustin