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Benefits Beginner: Introduction to 401(k) Plans

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1.
In a SIMPLE 401(k) plan, the employer may make either matching or non-matching contributions.
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True. The employer is allowed to choose an option.
2.
Early distributions from a 401(k) plan may be made for a first-time home purchase.
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False. Early distributions may be made from a 401(k) plan for several reasons, but a first-time home purchase is not one of them.
3.
If you withdraw $100,000 from your 401(k) plan and roll over only $90,000 into a new plan, what will happen to the other $10,000?
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You will be taxed on it. The IRS will consider the $10,000 to be income if you do not put it into a new 401(k) plan or IRA.
4.
The funds you contribute to your Roth 401(k) plan are tax-deductible.
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False. The hallmark of the Roth 401(k) is that employee contributions are not tax-deductible, but withdrawals in retirement are tax-free.
5.
If an employee defers 8 percent of his or her wages into a 401(k) plan, and the employer contributes an additional 3 percent, the employer is making a matching contribution.
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True. The employer is making a matching contribution.
6.
If you do a 401(k) rollover by removing and depositing the money yourself, you will be required to withhold some of the funds for taxes.
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True. You must withhold 20% for taxes.
7.
Assume that Mary earns $200,000 this year and defers $10,000 into her 401(k) plan. How much is her employer required to match?
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$0. Employers are not required to match contributions.