401a Questions

Hello! A tax manager just came to me with some questions for a 401a plan - which I know nothing about. He spent a good amount of time looking things up and seemed to have gotten conflicting answers:

- Do employees contribute to these?

- Is participation mandatory? How would it be mandatory? 

- Is there an employee contribution limit? Are there catch-up contributions?

- Is there some kind of employer match on these? 

Thanks for your help!

IRC Section 401(a) is the section of the tax code that applies generally to all tax-qualified retirement plans, whether defined benefit pension or defined contribution plans. The answers to your questions are all "it depends" on the type of plan and its particular provisions. Then there are many other code sections that apply to certain types of plans or plan provisions. What you're asking is basically for an introduction to tax-qualified retirement plans course, which is too voluminous for this forum.

Yeah.  You (or someone) will need to dive deeper into many things, including: nature of the proposed plan sponsor/employer, size of such employer, what is the goal of the sponsor, etc.  It sounds like neither you nor the "tax manager" has the necessary experience, so it may be advisable to engage a professional.

BTW, what is your role, and what is a "tax manager"?

1 hour ago, david rigby said:

Yeah.  You (or someone) will need to dive deeper into many things, including: nature of the proposed plan sponsor/employer, size of such employer, what is the goal of the sponsor, etc.  It sounds like neither you nor the "tax manager" has the necessary experience, so it may be advisable to engage a professional.

BTW, what is your role, and what is a "tax manager"?

We work in public accounting. I'm an Audit Manager who works on benefit plan audits. He's a Tax Manager who.. who knows what they do. He was doing some tax return for an individual whose company had a 401(a), 403(b), and Cash Balance Pension Plan. This individual's statement had various balances in each; since there was a balance associated with each plan type, I assumed the 401(a) was some type of specific plan.. not something that we audit. He too hadn't heard of a 401(a) before and came to me to see if I had any more information on top of his research, which I didn't, so here we are.

His inquiry was regarding Box 12: letter D and them being over the $23k limit, but his research took him down some weird path of questions I didn't have answers to. Some retirement website he got information from said it was a $69k limit, but didn't separate out any EE/ER Contributions or Catch-Up contributions not being applicable. 

Hahaha. The "pure" tax lawyers in my firm were perfectly happy to leave the "low 400s" of the tax code to the ERISA lawyers.

Even though Code Section 401(a) applies to several types of qualified plans, usually when someone refers to a "401(a) plan" they are talking about a governmental defined contribution plan. The 401(a) plan usually holds the governmental employer's match based on employee deferrals to a 457(b) plan, but can also hold employer non-elective contributions and employee after-tax deferrals.

I agree with EBECatty, though will add that it often is used to refer to a non-profit's defined contribution plan