Who is eligible to participate?

Any type of public or private company or not-for-profit organization. Appealing to small, growing companies and organizations.

The plan may require that employees be at least 21 years old and/or have performed 1 year of service (can be extended to 2 years if contributions are immediately vested).

Who contributes?
How much?

Employers must make mandatory, fixed contributions. The maximum amount of tax-deductible contributions is 25% of eligible compensation of all participants.

Special contribution limit for sole proprietors and partnerships.

Employee contributions are generally not applicable.

When are contributions vested?

Employer contributions are subject to a vesting schedule provided in the plan document.

How can funds be accessed?

The plan may permit employees to take loans and/or withdrawals according to plan provisions. Withdrawals made prior to age 59 ½ may incur automatic tax withholding of 20% plus a 10% early withdrawal penalty, unless a permitted exception applies.*
Tax-free rollovers are permitted to an IRA or qualified retirement plan.

What special administrative requirements are associated with the plan?

Simplified nondiscrimination testing and "top-heavy" testing is required, along with Form 5500 and ERISA disclosure.