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401a

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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 401a qualified trusts and details the various qualification rules of a 401(a) plan. Each state has specific laws governing 401a plans and a 401a plan must be either created or organized in the United States. Under a 401a plan, the employer determines the amount of money to be contributed each year (i.e. by the employee, the employer or both), 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. However, there are specific non-discriminatory requirements (i.e. detailed in IRC Section 401(a)5) that a 401a plan must adhere to. Funds from 401a plans may be distributed through lump-sum payments, rollovers, or annuity payments.



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