401(k) plans offer the highest level of employee pre-tax contributions, a wide range of employer contribution options, and an optimal loan provision. If you are a non-profit, we also have 403(b) plans that you can offer to your employees.
First Merchants offers an all-in-one bundled solution including:
- Professional asset management and investment monitoring
- Participant communications
- Company Specific Plan Design
Eligibility to Contribute
Eligibility requirements are set at the time the plan is established.
Maximum Annual Contribution
- Employer: Profit sharing and match: Up to 25% of compensation or $53,000 including employee contributions for 2015.
- Employee: Up to 100% of compensation or $18,000 ($24,000 if over age 50) for 2015.
- Combination may not exceed $53,000 ($59,000 if over age 50) for 2015.
- Employers can deduct contributions from federal taxable income.
- Employees can make pre-tax contributions.
Your plan may allow you to allocate part or all of your deferral to a Roth 401(k). Roth 401(k) salary deferrals are not tax deductible but contributions and earnings grow tax deferred and may be eligible for income tax free withdrawals if held for five years and by reaching age 59 ½.
Taxation of Earnings and Withdrawals
Pre-tax contributions and earnings are taxed as ordinary income when withdrawn.
Types of Investments
Broad array of mutual funds (open architecture).
10% IRS early withdrawal penalty if withdrawn before age 59 ½ unless exception applies.
- Separation of service after reaching age 55
- Rollover to an IRA
- Substantially equal payments made over life expectancy
- Qualified military reservist
Must begin at age 70 ½ for those no longer working for the employer. (Note some exceptions may apply.)
Deadline to Set Up and Fund
- Plan must be established by the last day of the business’ fiscal year. (Note that it may take up to 90 days to establish a plan.)
- Salary deferral portion of the contribution must be deducted from participants’ paychecks (must be remitted within 7 business days).
- Employer contribution may be made through the business’ tax filing due date plus extensions.
Commissions and Fees
Varies by mutual fund family.