401(k)

The 401(k) is a savings plan that allows employees to set aside tax-deferred income for retirement. In 2008, they can contribute up to $15,500 annually if they're under 50 or $20,500 if they're age 50 or over. In 2009, they can contribute up to $16,500 annually if they're under 50 or $22,000 if they're age 50 or over. An Equity Trust 401(k) is truly self directed, allowing participants to invest in both traditional and non-traditional assets.

Why Should I Open a 401(k)?

The 401(k) is attractive to employers and employees because of the high contribution limits and large tax deductions available. Plus, you have the ability to truly self direct investments in traditional and non-traditional assets. Two components comprise the maximum 401(k) plan contribution:

1. An employee salary-deferral contribution - In 2008, the employee can contribute up to $15,500 annually through salary deferral, although this may not exceed 100% of the employee's pay. In 2009, the employee can contribute up to $16,500.
2. An employer profit-sharing contribution - The annual limit for this is 25% of the employee's pay.

The total annual contribution limit from both sources is $46,000 in 2008 and $49,000 in 2009. However, under a "catch up" provision, individuals age 50 and over may contribute $20,500 in 2008, allowing for a total contribution limit of $51,000. In 2009, the "catch-up" increases to $22,000, allowing for a total contribution limit of $54,000.

Eligibility

The main requirement for a 401(k) is earned income as an employee. Employees can contribute funds on a post-tax elective deferral basis or as pre-tax deferrals under their traditional 401(k) plans.