Q:

What is a 401(a) plan?

A:

Quick Answer

A 401(a) plan is a defined contribution money purchase plan that is typically used for retirement. This plan allows both employers and employees to make contributions. A 401(a) plan is tax-exempt until the first withdrawal is made.

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Full Answer

A 401(a) plan benefits both employees and their designated beneficiaries. Depending on investments, this plan's value can increase over time. A 401(a) is often used in conjunction with a 457 deferred compensation plan. Employee contributions are either mandatory or voluntary, and they are up to the discretion of the employer. The employee may withdraw funds as a lump sum, as a rollover to another plan or through annuities.

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