3752 / What is a 401(k) plan?

A 401(k) plan generally is a profit sharing plan or stock bonus plan that provides for contributions to be made pursuant to a “cash or deferred arrangement” (“CODA,” see Q 3755) under which individual participants elect to take either amounts in cash or to have the amounts deferred under the plan. With the availability of Roth contributions under 401(k) plans, the employee also may elect to have Roth deferrals made on an after-tax basis to the CODA.

In addition to the general qualification requirements ( Q 3838 through Q 3936), special qualification rules apply to 401(k) plans ( Q 3753 to Q 3808). Certain nondiscrimination requirements can be met by satisfying the requirements for safe harbor plans ( Q 3773). There are requirements for SIMPLE 401(k) plans ( Q 3778) and there are automatic enrollment plans for plan years beginning after 2007 ( Q 3762).

The elective deferral limits apply to individuals participating in more than one salary reduction plan, such as a 401(k) plan and a Section 403(b) tax sheltered annuity or SIMPLE IRA
( Q 3760). There also are requirements that pertain to catch-up contributions by participant’s age 50 or over ( Q 3761).