Evaluate the employee stock plan or retirement savings plan (such as a 401K plan

Question

Evaluate the employee stock plan or retirement savings plan (such as a 401K plan) of your company, or that of a company of a friend or relative. In light of Sarbanes-Oxley, does the plan provide sufficient information and financial protection for the employees? Do you believe that the plan, as designed, is structured in such a way that current employees will be motivated to greater productivity, and new employees will be attracted to your company? Describe feasible measures that would improve the plan

Explanation / Answer

Introduction: A 401(k) plan is a qualified employer-established plan to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings in a 401(k) plan accrue on a tax-deferred basis.

IRS announces 2017 pension plan limitations. 401(k) contribution remains unchanged at $18000 for 2017.

The 401(k) plan is the most common type of retirement IRS plan U.S. employers use, and the IRS can annually adjust contribution limits. For 2017, your contribution limit (aka "elective deferral limit") remains the same at $18,000 while the overall 401(k) contribution limit has changed slightly. Here are the details of 401(k) contribution limits, some alternative types of accounts, and some strategies to help you maximize your retirement savings.

The 2017 401(k) contribution limits

For the 2017 tax year, 401(k) participants can choose to have up to $18,000 of their compensation placed into their account, with an additional $6,000 catch-up contribution allowed for participants 50 and older. These limits haven't changed for the past two years.

However, the overall 401(k) contribution limits have increased for 2017. Including your elective deferrals, as well as any employer matching contributions, nonelective employee contributions, and any allocations of forfeitures, the overall 401(k) contribution limit is $54,000. For participants 50 or older, the $6,000 catch-up allowance applies to this limit as well, translating to an overall limit of $60,000. You also can't contribute more than your total compensation.

Nowadays people are forced to retire at 45 or 50 and they face financial problems because of no work in their hands and similarly self-employed people and others with no source of employment in their old age can avail these pension plans to secure their future and they should invest in these pension plans according to the contribution limits mentioned.

For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) is up from $53,000 in 2016 to $54,000 in 2017. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $265,000 in 2016 to $270,000 in 2017.

If your employer allows after-tax contributions to your 401(k), you also get the advantage of the $54,000 limit for 2017. It’s an overall cap, including your $18,000 (pre-tax or Roth) salary deferrals plus any employer contributions (but not catch-up contributions).

These limits are needed to make the people not to misuse the benefits given to them and the benefits will be given to them according to the income made by the individual and the contribution made by him to the pension plan.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.