401(k) Plans
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If your company wants to offer a retirement plan with the greatest number of features and tax advantages to employees, a 401(k) plan may be right for you. A 401(k) is funded by employee contributions, with optional contributions from the employer. Merrill Lynch provides a full range of 401(k) plan options, from traditional plans to safe harbor versions to ones designed specifically for solo businesses. Your Merrill Lynch Financial Advisor can help you choose the solution that’s right for your business.

  • Save on taxes – employer contributions are generally tax-deductible as a business expense
  • Recruit and retain employees – 401(k) plans are popular and allow contributions to be taken from pre-tax salary
  • Plan portability and flexibility become valuable employee benefits
  • Offer wide investment choices

    401(k) Plan Features

    Plan description

    The federal government established the 401(k) plan as a way for people to save for their retirement. In order to encourage savings, the government created special tax advantages for 401(k) participants.

    Plan types

    In addition to traditional 401(k) plans, other types of 401(k) plans available include:

    • Owner-only 401(k)
    • Safe harbor 401(k)

    Participant eligibility

    Eligibility depends on the rules you design for your plan. Many companies require new employees to complete six months or even up to a year of service before they’re eligible to participate. Some companies also require employees to be at least 21 years old to participate.

    Contribution limits

    Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limit – the maximum 401(k) deferral cannot exceed a total of $15,500 ($20,500 for age 50 and older) in 2007.

    Frequently Asked Questions About 401(k) Plans

    What is a 401(k)?

    401(k) is a retirement savings plan. Employees contribute through payroll deductions on a pre-tax basis, reducing their current taxable income. Taxes are postponed, or deferred, until they withdraw their money. Any earnings that accumulate in the account are tax-deferred as well.

    How much can an employee contribute?

    Contributions are subject to certain limitations under federal tax law, including an annual maximum limit on your pre-tax contributions of $15,500 ($20,500 for age 50 and older) in 2007. 

    Are employers responsible for an employee’s investment choices within his or her account?

    No. Participants in 401(k) plans can choose, within certain limits, how to invest their own contributions.

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