A 401(k) is a type of retirement savings account in the United States, which takes its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code). A contributor can begin to withdraw funds after reaching the age of 59 1/2 years. 401(k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401(k)-type accounts .
Employers can help their employees save for retirement while reducing taxable income under this provision, and workers can choose to deposit part of their earnings into a 401(k) account and not pay income tax on it until the money is later withdrawn in retirement. Interest earned on money in a 401(k) account is never taxed before funds are withdrawn. Employers may choose to, and often do, match contributions that workers make. The 401(k) account is typically administered by the employer, while in the usual "participant-directed" plan, the employee may select from different kinds of investment options. Employees choose where their savings will be invested, usually, between a selection of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.
The South Carolina Enrollment and Salary Deferral Agreement is a legal document that outlines the terms and conditions for employees of South Carolina state agencies to enroll in a salary deferral program. This program allows employees to defer a portion of their salary, which will be contributed to a retirement savings plan or other qualified benefits plans. The agreement ensures that employees understand the terms of the deferral program and the impact it will have on their salary and retirement benefits. It covers various aspects, including the percentage of salary that can be deferred, the timeframe for deferrals, and the investment options available for the deferred funds. There are different types of South Carolina Enrollment and Salary Deferral Agreements, depending on the retirement savings plan chosen by the employee. These may include the South Carolina Deferred Compensation Program (DCP), which offers a variety of investment options such as mutual funds and annuities, or the South Carolina Optional Retirement Program (ORP), designed for eligible employees of higher education institutions. Employees who choose to participate in the South Carolina Enrollment and Salary Deferral Agreement must carefully review the terms and conditions before signing. It is essential to consider factors such as the long-term financial implications, investment risks, and potential tax advantages or consequences associated with the chosen retirement plan. By entering into this agreement, South Carolina state employees can take control of their financial future by setting aside funds for retirement and other qualified benefits plans. The Enrollment and Salary Deferral Agreement offers a valuable opportunity to save for the future while enjoying potential tax advantages and investment growth.
