Talk:401(k)

From Bogleheads

I don't think Rule 72(t) SEPPs can be taken from a 401(k). For example, retirementthink.com states

Also, 401k or other employer plans do not allow 72(t) distributions. A 72(t) distribution has to be taken from an IRA.

Of course, if you quit working you can roll your 401(k) over into an IRA, from which you can take 72(t) SEPPs. - Ken Schwartz 19:30, 18 June 2008 (EDT)

IRS Publication 575 talks about "Distributions made as part of a series of substantially equal periodic payments..." to avoid the 10% penalty, but 72(t) does indeed seem to be the incorrect terminology in this case, as it's never mentioned there. --CyberBob 20:28, 18 June 2008 (EDT)

Actually, I think I've changed my mind. IRS documentation is hard to read, but I don't see anything in Pub 575 which prohibits SEPPs from 401(k)'s. [I believe 72(t) distributions and SEPPs are synonymous, but I could be wrong.] Various websites seem to disagree with each other. For example, this page from 401khelpcenter states that 72(t) SEPPs can be taken from 401(k)'s. Sites which go into gory detail regarding 72(t) methods seem to discuss IRAs only. My hunch now is that SEPPs from 401(k)'s may be legal, but obtaining employer cooperation is problematic. Since one has presumably terminated employment anyway, it's easier to do a rollover into an IRA. - Ken Schwartz 22:08, 18 June 2008 (EDT)

A piece still missing from employer administration that ought to be mentioned is the availability of plan documents, but the Plan Summary Document and the plan document itself. I didn't have a good source on my desktop discussing these, so I left it for later. Employees/investors also are required to receive statements at least quarterly, with some minimum information in those statements. This would belong above the employer administration section - again I didn't have a source on my desktop that would be good for covering these. Thanks to Blbarnitz for asking me to come contribute to this article. GRBerry 15:12, 20 June 2008 (EDT)

You can write a whole book on 401(k) rules. I don't know how much details we should go into. Loans, hardship withdrawals, HCE definition, key employees and top-heavy rules. Requirements on Summary Plan Description, Summary Material Modification, annual one-pager financial report, safe harbor notices. Technically there is no 401(k) plan. 401(k) is a feature tagged onto other types of plans. Tfb 09:54, 21 June 2008 (EDT)

I was thinking we'd limit this page to the things an employee/investor might care about. The plan documents would tell them whether or not some of the optional features are available in their plan and the plan specific rules for them, so we might advise someone to go check those documents, and thus want to have a brief description that distinguishes the two. On the other hand, we'd never tell an individual employee the details of the audit that a 401(k) plan undergoes, because they won't care, so we wouldn't cover that at all. Also, we can use links. HCE is the sort of specialty topic that doesn't need to clog up this page when we can put the details on a separate page. GRBerry 00:38, 22 June 2008 (EDT)

Saver's tax credit

Why does this page claim contributions are ineligible for the saver's tax credit? Right on the page it links to, in Pub. 590, 401(k) contributions are item 2.a. in the list of eligible contribution types, and even after-tax contributions will qualify. Is there some subtlety I'm missing?--LH2004 03:26, 31 August 2008 (UTC)

I'm not the one who wrote that sentence, but I see what you are saying. What does your tax law knowledge say? PiperWarrior 03:58, 31 August 2008 (UTC)

Sadly, my reference books tend to run toward issues that matter to taxpayers who are more...lucrative for their lawyers. I can now confirm that I.R.C. sec. 25B(d)(1) lists the kinds of contributions eligible for the credit as: "qualified retirement contributions," that is, contributions to IRA's and ancient sec. 501(c)(18) plans; "elective deferrals," that is, pre-tax contributions out of your paycheck to 401(k), SARSEP, 403(b), and Simple plans, elective deferrals to 457(b) plans (for governmental employers only), and "voluntary employee contributions" to any "qualified retirement plan," that is, after-tax contributions to qualified plans, 403(a) plans, 403(b) contracts, IRA's and individual retirement annuities. Because of some slightly odd wording, it would appear that Roth 401(k) and 403(b) contributions are excluded, but I'm sure that's not the intent and that the IRS wouldn't read the statute that way. Therefore, I will now delete credit ineligibility as a downside of 401(k) plans. Anyone who thinks this is wrong, please speak up.--LH2004 14:12, 31 August 2008 (UTC)