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401a

A 401a is a retirement plan that employers set up and that meet the qualification requirements of the Internal Revenue Code (IRC), Section 401a. Section 401a defines qualified trusts, including the various qualification rules. Section 401k further allows for employees to contribute to their plans, whereas under 401a plans, no employee contributions are allowed. Each state has specific laws governing 401a plans. Under a 401a plan, the employer determines the amount of money to be contributed each year, vesting schedules and eligibility requirements that may be tied to job performance as a way to retain key employees. Under 401a, employers are allowed to create different 401a plans for different groups of employees, giving the employer flexibility in creating different incentive programs for specific employee categories. Funds from 401a plans may be distributed through lump-sum payments, rollovers, or annuity payments.


               


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