401(k) plans are defined contribution plans used to fund retirement benefits. 401(k) plans are customarily funded through employees' pre-tax deductions, up to an annual limit that is determined by the IRS. Employees who max out on their pre-tax contributions, and who will turn 50 before the end of a calendar year, can make additional catch-up contributions on a pre-tax basis. (register to read more)executes this withholding. Once withheld, the Employee Retirement Income Security Act (ERISA) requires that employees' contributions become plan assets at the earliest date on which those contributions can reasonably be segregated from the employer's general assets. The outside limit is the 15th day of the month following the month during which the withholding occurred. 401(k) plans must pass non-discrimination tests; plans that fail the tests may have their tax-qualified status revoked. Employees who borrow from...
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