What is 401(a) Plan?
Definition of 401(a) plan
A 401(a) plan is a money-purchase pension plan that is set up by a company.
Brief Explanation of 401(a) plan
The program allows for efforts by the company, the staff member or both. Participation quantities are either dollar-based or percentage-based. And the supporting company determines qualifications and the vesting schedule. Funds can be removed from a 401(a) plan through rollovers to a different qualified pension plan, a lump-sum payment or through a premium. Contribution amounts are either dollar-based or percentage-based.
Employers can form multiple 401(a) plans, each with unique qualifications requirements, contribution quantities and vesting plans. Companies use the plan to create motivation programs to help maintain workers. Each company manages the plan and decides the contribution boundaries. A 401(a) plan is a form of pension plan made available to workers of govt. departments, schools and charitable companies. Eligible workers who take part in the plan include govt. workers, instructors, directors and support. A 401(a) program’s features are similar to a 401(k) plan. The key difference is that it is the main pension plan kind offered to instructors.