A 401(k) plan is a type of tax-qualified deferred compensation plan. An employee can elect to have the employer contribute part of his/her wages to the 401(k) plan. The deferred wages are not subject to income tax withholding at the time of deferral.
Distributions from a 401(k) plan may qualify for lump-sum distribution or rollover as long as they meet the requirements. Many 401(k) plans allow employees to make a hardship withdrawal. However, hardship distributions are not treated as eligible rollover distributions.
In today’s economic times more and more 401(k)s are being rolled over to self-directed IRAs so the investor has more control over their retirement funds.
Filed under: 401(k), 401(k) rollover, self-directed ira | Tagged: 401(k), deferral, deferred compensation plan, distributions, hardship withdrawal, income tax, IRA, self-directed ira
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