When was the 401(k) plan created by Congress?
Congress enacted Section 401(k) on the 6th of November 1978 as part of the Revenue Act. This law established a new type of employer-sponsored retirement plan that did not exist before this date.
Questions about 401(k)
Short answers, pulled from the story.
Who designed the first implementation of the 401(k) plan?
Ted Benna worked at the Johnson Companies when he designed the first implementation of this plan. He created it about three weeks after the law passed, even before the Revenue Act officially went into effect.
What are the contribution limits for 401(k) plans in 2024?
The maximum employee deferral limit reached $23,000 for 2024 according to IRS guidelines. Employees aged 50 or older receive additional catch-up contributions up to $7,500 for that same year and total annual contributions including employer matches hit $69,000 under section 415 limits.
How does Roth 401(k) differ from traditional 401(k) accounts regarding taxes?
Traditional accounts allow contributions to be deducted from taxable income in the year they are made while withdrawals from these accounts are added back to taxable income during retirement. Roth accounts use post-tax income for contributions so withdrawals remain tax-free if qualified distributions occur more than five years after the first contribution and only after age 59½ unless an exception applies.
When do required minimum distributions start for individuals turning 72 after the 31st of December 2019?
Required minimum distributions start April 1st of the year following age 72 for individuals turning 72 after the 31st of December 2019. The Internal Revenue Code imposes a ten percent excise tax on early distributions before this age with exceptions for death or total disability.