Business and Personal Finance Dictionary

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• RETIREMENT PLANS (IRS CODE SECTIONS 401-507)
  
  401(a) This retirement plan meets the qualification requirements of Internal Revenue Code Section 401(a). In this type of plan, employers determine the amount of money that they may contribute on your behalf each year, the requirements that you must meet to receive those contributions, and under what circumstances the money may be made available to you. Some 401(a) plans may allow for employee after-tax contributions or, in the case of a 401(k) plan, employee pre-tax contributions. Types of 401(a) plans include profit sharing plans, pension plans, and money purchase plans. 401(k) Under section 401(k) of the Internal Revenue Code, employees of private corporations and, beginning in 1997, some tax-exempt organizations, can set aside money for retirement on a pre-tax basis through a plan sponsored by their employer. To encourage saving for retirement through these plans, the federal government created special tax advantages for 401(k) contributions. 403(b) Under Section 403(b) of the Internal Revenue Code, employees of 501(c)(3) non-profit institutions (such as colleges and universities, hospitals, museums, research institutes, and foundations and public schools) can set aside money for retirement on a pre-tax basis through a plan offered by their employer. To encourage saving for retirement through these plans, the federal government created special tax advantages for 403(b) contributions. 457 Under section 457 of the Internal Revenue Code, employees of state or local governments, their agencies, and tax-exempt employers can set aside money for retirement on a pre-tax basis through a plan sponsored by their employer. To encourage saving for retirement through these plans, the federal government created special tax advantages for 457 contributions. Different from a 401(k) or other type of qualified retirement plans, a 457 has no requirement to be non-discriminatory. 457(f) Under Section 457(f) of the Internal Revenue Code, an employer can set aside money to supplement retirement income for a select group of employees in their organization. Since these programs are designed to attract and retain key employees and do not provide a benefit for all employees, these programs do not qualify for all of the tax advantages that are made available to 401(a) plans, for example.
  
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