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choose to deposit part of their earnings into a 401(k) account and not pay income tax on it until the money is later withdrawn in retirement. Interest earned on money in a 401(k) account is never taxed before funds are withdrawn.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.
Maine Enrollment and Salary Deferral Agreement is a legally binding document that outlines the terms and conditions under which an employee can voluntarily elect to defer a portion of their salary for retirement or other benefits programs. This agreement is commonly used by employers in the state of Maine to provide their employees with the opportunity to save for their future or take advantage of specific benefits. The Maine Enrollment and Salary Deferral Agreement typically specifies the amount or percentage of salary that the employee wishes to defer and the duration of the deferral period. It also outlines the eligible retirement or benefit plans in which the deferred funds will be invested. One type of Maine Enrollment and Salary Deferral Agreement is the 401(k) Salary Deferral Agreement. This agreement allows employees to defer a portion of their salary into a 401(k) retirement savings plan. The deferred funds are invested and grow tax-deferred until the employee reaches retirement age. Another type is the Health Savings Account (HSA) Salary Deferral Agreement. This agreement allows employees to defer a portion of their salary into an HSA, which can be used to pay for qualifying medical expenses. The deferred funds are contributed pre-tax, reducing the employee's taxable income. Additionally, the Maine Enrollment and Salary Deferral Agreement may include provisions for other types of benefit programs, such as Flexible Spending Accounts (FSA's), where employees can set aside pre-tax funds to pay for eligible healthcare and dependent care expenses. Overall, the Maine Enrollment and Salary Deferral Agreement provides employees with the opportunity to save for retirement or take advantage of various benefits programs, while also offering potential tax advantages.
