401(a)

Whether you are looking to set up a new 401(a) plan or add it to complement an existing 457 retirement plan, Security Benefit has multiple options and knowledgeable staff who can assist you with the proper plan design. 

Advantages of Using a 401(a) Defined Contribution Plan for Employer Contributions

  • No offset against the 457 Plan contribution limit
  • Contributions are not subject to FICA tax as in a 457 Plan
  • A vesting schedule can apply to the contributions
  • Participant loans can be made available
  • The IRS 10% early withdrawal penalty can be avoided after age 55 (instead of 59½)

How contributions are taxed in a 401(a) plan

Participants do not pay income taxes on contributions or earnings until they make a withdrawal or are transferred to their beneficiary. Contributions may remain tax deferred and allows them to compound until the participant is eligible to take withdrawals for retirement.

Key Features of a 401(a) plan

  • You can set up a 401(a) plan to cover specified employee groups
  • Eligibility requirements can include up to age 21 and two years of service (1,000 hours each year)
  • Contributions are discretionary each year, but must be substantial and recurring
  • Contributions are allocated according to a formula specified in the plan
  • Ownership of an employee’s account can be tied to a vesting schedule based on years of service
  • The participant’s vested account balance is generally payable upon retirement, severance from employment, disability or death
  • Taxable distributions on account of disability, death or after age 55 and severance from employment avoid the IRS 10% early withdrawal penalty
  • Employees can defer any or all distributions until they are subject to IRS minimum distribution rules at the later of age 70½ or retirement
  • Younger and long-term employees may benefit the most because they have more contribution opportunities and a longer period of tax-deferred earnings

To learn more on how we can help you with your 401(a) plan, contact Security Benefit at 800.747.5164, option 3. 

Neither Security Benefit Life Insurance Company nor Security Distributors is a fiduciary and the information provided is not intended to be investment advice. This information is general in nature and intended for use with the general public. For additional information, including any specific advice or recommendations, please visit with your financial professional.

Services offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit).