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401(k) Plans

One of the most commonly known retirement plans is the 401(k).  This type of plan is a defined contribution plan which allows for employees to defer money from their own paychecks to save for retirement and also create personal tax deductions.

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We’ll help you plan your 401k

Planning for retirement can often feel complex, but having the right resources and guidance makes a significant difference. At ERA Admin, we aim to equip individuals with the knowledge and tools necessary to make informed decisions about their financial future. Whether you are starting your retirement savings journey or optimizing your existing plan, understanding options like 401(k)s is a crucial step toward achieving long-term security and peace of mind.

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Frequently Asked Questions

Is a pension plan a 401(k)?

No, a pension plan is not the same as a 401(k) plan. A pension plan, often referred to as a “defined benefit plan,” typically guarantees a specific monthly payment to employees upon retirement, based on factors like years of service and salary history. The employer bears the investment risk in a pension plan.

Is a 401(k) the same as a retirement plan?

While a 401(k) is one type of retirement plan, it is not synonymous with all retirement plans. A 401(k) is a specific type of employer-sponsored plan under the broader category of retirement savings plans. Other types of retirement plans include Individual Retirement Accounts (IRAs), pensions, and profit-sharing plans.

What is a safe harbor plan for a 401(k)?

A safe harbor 401(k) plan is a specific type of 401(k) plan in which employers are required to make contributions to employee accounts (either matching or non-elective contributions) to meet certain IRS requirements. This ensures the plan avoids annual nondiscrimination testing, making it easier to maintain compliance. Safe harbor 401(k) plans are particularly popular with smaller businesses that want to encourage employee participation while minimizing administrative hurdles.

What is a profit-sharing 401(k) plan?

A profit-sharing 401(k) plan allows employers to make discretionary contributions to their employees’ retirement accounts. These contributions are typically based on the company’s profitability but are not required annually. Employees can still make regular contributions to their 401(k) accounts, and the profit-sharing component acts as an additional benefit.

Is a 401(k) the same as a pension plan?

No, these are distinct retirement plans. A pension plan provides guaranteed income in retirement, typically funded entirely by the employer. A 401(k) requires employee contributions, often with employer matching, and the retirement income depends on investment performance. Both can be part of an employer’s retirement offerings, but they work differently in terms of contributions, benefits, and risk.