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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 Florida, 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 Florida can contribute a portion of their wages to their 401(k) accounts before taxes are taken out, which means these elective deferrals reduce their taxable income. Employers have the option to make contributions to their employees' 401(k) accounts, which can be matched to the employees' contributions or non-elective. Upon retirement or when the employee is eligible to take distributions, the money withdrawn from a traditional 401(k) account, including any earnings, is subject to income tax. However, qualified distributions from a designated Roth 401(k) account are tax-free, provided certain conditions are met. It's important to note that while the state of Florida does not have a state income tax, federal income tax still applies to 401(k) distributions.

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Employment law

retirement plans—401k plans

Individual & Family Legal Plan

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Employment law

retirement plans—401k plans

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