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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 South Dakota, 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 South Dakota 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. 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, the distributions from a traditional 401(k) account are taxed as ordinary income, while qualified distributions from a Roth 401(k) are generally tax-free. South Dakota does not have a state income tax, so distributions are only subject to federal income tax. It's important to note that specific plan details can vary, and individuals should consult with an attorney or a tax advisor for personalized advice.

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Employment law

retirement plans—401k plans

Individual & Family Legal Plan

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South-Dakota State Code

South-Dakota State Code

Employment law

retirement plans—401k plans

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