A traditional 401k plan is ideal for companies who want to provide a benefit to their employees but do not want to be required to make a company contribution (e.g. match or profit-sharing). Company contributions are completely discretionary in a Traditional 401k plan.
Maximum Deferral Amount (employee contributions):
- The IRS Limit: $19,500 for 2020
Catch Up Contribution (for participants over age 50):
- The IRS Limit: $6,500 for 2020; participants over age 50 may contribute $26,000 for 2020 ($19,500 + $6,500)
Eligibility Requirements (optional):
- You may require an employee complete 12 consecutive months of employment with at least 1000 hours of service during those 12 months (one year of service).
- You may choose to exclude employees who are under age 21.
Entry Dates (optional):
- Monthly, quarterly or semi-annually.
Profit Sharing Contributions:
- Discretionary; up to the IRS Limit of 25% of compensation (up to a maximum of $57,000 for 2020).
Vesting for employer contributions:
- Up to a six (6) year graded vesting schedule.
- Loans and Hardship withdrawals may be permitted.
- Minimum loan amount is $1,000.
- Maximum loan amount is one half the vested account balance but no more than $50,000.
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