The 403(b)’s Partner: 401(a) Plans
Many lucky employees who have 403(b) accounts that they contribute to also have 401(a) accounts for their employer’s contributions. In this case, 401(a) accounts look a lot like 403(b) accounts except only the employer contributes to the 401(a). Nonprofits pair the 401(a) plan with a 403(b) plan so they can provide the employee benefit of matching employee contributions. Employees contribute to the 403(b) and the employer either matches their contributions by contributing to the 401(a) account or contributes an automatic amount in the 401(a) whether or not the employee contributes to the 403(b).
Here are a few facts about 401(a) plans:
• 401(a) plans are special because employers can set up different plans for different groups of employees, such as managers or unionized workers.
• Employers can allow loans against vested 401(a) balances and hardship withdrawals.
• 401(a)s can have cliff or graded vesting schedules just like 401(k)s. This means that an employee may need to work at the company for a couple of years before she completely owns the plan balance.
• Like other retirement accounts, the employee will owe a 10 percent penalty if she withdraws money from her account before age 59½, and she must start taking minimum distributions once she is age 70½.
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.