A 401(k) is a type of retirement savings account in the United States, which takes its name from subsection 401(k) of the Internal Revenue Code (Title 26 of the United States Code). A contributor can begin to withdraw funds after reaching the age of 59 1/2 years. 401(k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401(k)-type accounts .
Employers can help their employees save for retirement while reducing taxable income under this provision, and workers can choose to deposit part of their earnings into a 401(k) account and not pay income tax on it until the money is later withdrawn in retirement. Interest earned on money in a 401(k) account is never taxed before funds are withdrawn. Employers may choose to, and often do, match contributions that workers make. The 401(k) account is typically administered by the employer, while in the usual "participant-directed" plan, the employee may select from different kinds of investment options. Employees choose where their savings will be invested, usually, between a selection of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.
The South Dakota Enrollment and Salary Deferral Agreement is a legal contract entered into by an employer and an employee in the state of South Dakota. This agreement outlines the terms and conditions regarding the employee's enrollment in a salary deferral program. A salary deferral program allows employees to allocate a portion of their salary to be deferred, meaning that it is set aside and not received as immediate compensation. Instead, the deferred amount is typically invested in a retirement plan, such as a 401(k) or 403(b) plan, allowing employees to save for their future retirement. The South Dakota Enrollment and Salary Deferral Agreement ensures that both the employer and the employee are aware of their respective responsibilities and rights regarding the salary deferral program. It specifies the amount or percentage of the employee's salary that will be deferred and the specific retirement plan that the deferred funds will be invested in. This agreement may also include provisions for employer contributions, vesting schedules, investment options, and any other relevant details pertaining to the salary deferral program. It helps establish a clear understanding between the employer and employee, ensuring compliance with applicable laws and regulations. There may be different types of South Dakota Enrollment and Salary Deferral Agreements based on the specific retirement plan utilized by the employer. For example, there could be separate agreements for 401(k) plans, 403(b) plans, or other retirement savings plans approved by the South Dakota state authorities. In conclusion, the South Dakota Enrollment and Salary Deferral Agreement is a crucial legal document that governs the employer-employee relationship regarding salary deferral programs and retirement savings. It protects both parties' interests, clarifies expectations, and helps employees plan for a financially secure future.
