Traditional 401(k) plans more complicated

Traditional 401(k) plans
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Small-business retirement plans

Traditional 401(k) plans

A traditional 401(k) plan doesn’t fall under the safe-harbor provisions for annual nondiscriminatory testing. That means this plan is subject to annual testing that ensures the contributions made on behalf of rank-and-file workers is proportional to those made on behalf of owners, managers or highly compensated employees. These plans also must file an annual report showing details about the plan and its operation to the Internal Revenue Service, the U.S. Department of Labor, plan participants and the public using Form 5500. Most one-participant plans (sole proprietor and partnership plans) with total assets of $100,000 or less are exempt from this annual filing requirement.

The plan can be written to allow plan loans so employees can borrow against their plan balances.