Learn About 401(a) Defined Contribution Plans

Your employer's 401(a) defined contribution plan provides you with an additional way to save toward retirement.

A 401(a) defined contribution plan is an employer-sponsored plan for employees who meet eligibility rules as defined by, your employe's plan documents. Your employer will also identify the investment providers available under the 401(a) plan.

Your 401(a) plan consists of employer contributions, which may be made under be a discretionary or fixed formula, and may provide for matching contribution on participants' contributions. If made on a pre-tax basis, employee contributions to a 401(a) plan are mandatory (and, if the employer is a governmental entity, may meet the requirements of a governmental pick-up contribution); otherwise, they can be made on an after-tax basis. In general, (other than after-tax contributions) contributions and earnings in your 401(a) participant account are not subject to federal income taxes until they are withdrawn.

Who is eligible to participate in a 401(a) defined contribution plan?
Your employer's 401(a) plan document will establish the criteria for eligibility, which provide that you reach a minimum age and/or satisfy a period of service with the employer. In some cases, if the employer is entity, you may be required to choose to participate in your employer's 401(a) defined contribution plan instead of participating in the governmental retirement system.

Are there limits on the amount of contributions that can be made to my plan account?
Total contributions and forfeitures that can be allocated annually to your participant account under the plan is the lesser of:

When can I take distributions?
Your plan will determine when you are permitted to take distributions. Depending on your plan's provisions and in accordance with the Internal Revenue Code, to allow you may be entitled to a distribution when you have terminated employment, retired or become disabled your designated beneficiary will be able to take a distribution from your account upon your death. Some plans may permit you to take an in-service withdrawal of your account under certain circumstances. Since your employer's 401(a) plan may not permit certain types of distributions, be sure to check with your employer about specific reasons for distribution permitted under your plan.

Distributions from your 401(a) plan before you reach age 59 ½ are generally subject to an IRS 10% premature distribution penalty tax, unless another IRS exception applies.

Once you are retired, the IRS minimum distribution rules require you to begin taking distributions from your 401(a) plan by April 1 of the calendar year following the calendar year in which you are at least age 70½.

Your 401(a) plan and the terms of the investment provider's product will determine the form of benefits available for your distribution. In the alternative, to the extent permitted under IRS rules, you can roll over the eligible portion of your distribution to a Traditional Roth IRA or to another 401(a), 401(k), 403(b) or a governmental 457(b) plan that accepts rollovers.

If your 401(a) plan permits, you may be eligible to take a loan from your account balance.

For educational use only.