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Employment law

retirement plans—401k plans

A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Some of the key features of 401k plans are:

• Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).

• Employers can contribute to employees’ accounts.

• Distributions—including earnings—are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).

In Alaska, as in all states, 401(k) plans are governed by federal law, specifically the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Employees in Alaska can elect to defer a portion of their salary into their 401(k) plan, which reduces their current taxable income, except in the case of Roth 401(k) contributions, which are taxed upfront but may be withdrawn tax-free in retirement if certain conditions are met. Employers have the option to make contributions to their employees' 401(k) accounts, which can be matched up to a certain percentage. Upon retirement or when the employee becomes eligible for distribution, the money from the 401(k) plan, including any earnings, is taxed as ordinary income, except for qualified distributions from Roth accounts. It's important to note that while the state of Alaska does not have a state income tax, federal income tax rules still apply to 401(k) distributions.

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Employment law

retirement plans—401k plans

Individual & Family Legal Plan

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Alaska State Code

Alaska State Code

Employment law

retirement plans—401k plans

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