How does a 401(k) plan compare to an IRA?
There are major advantages over an IRA: The annual contribution limit is higher. Participants can borrow from their accounts. The employer may make additional matching contribution. The employer may make additional profit sharing contribution. The employer can make the 401(k) plan part of a new-comparability plan, thus optimizing the contributions for selected employees. The employer can allow for after tax Roth elective deferrals to the plan. Back to Top Are there drawbacks to a 401(k) Plan? Yes, there are: 401(k) plans have relatively high administrative costs when compared to other plans because of multiple testing and complex record keeping. Although the total contributions made by or on behalf of a single participant can be as high as 100% of pay, the combined employer discretionary and employer matching contributions cannot exceed 25% of the total covered payroll. Back to Top Any suggestions on investments? To avoid participant dissatisfaction (and lawsuits) in the event of inves
