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Investment FAQS

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401 (k) Plans

A 401 (k) is a qualified plan that allows for employee pre-tax contributions. The value of a 401 (k) investment grows tax deferred until withdrawn, when it is taxed as ordinary income

Key Benefits of a 410 (k) Plan:
  • Permits pre-tax salary deferral contributions
  • Due to complicated discrimination testing and tax reporting, third party administrative services are required
  • Employer contributions are tax deductible
  • Employer matching and Profit Sharing contributions are optional
  • Vesting schedule can be applied to employer contributions
  • Participant loans are available
  • Withdrawals are governed by the plan document and may be restricted

Who Can Establish:
  • Businesses
  • Partnerships
  • S-Corporations
  • C-Corporations
  • Non-Profit Groups
Annual Contributions: (based on 2009 limits)
  • Employees can defer up to $16,500 ($22,000 if age 50 or older).
  • Deferrals and employer contributions cannot exceed the lesser of 100% of employee’s compensation or $49,000 per employee. Catch-up deferrals are not included in this limit.
  • Total deductible employee contributions to the plan cannot exceed 25% of total eligible compensation. Employer contributions do not include deferrals.
  • Maximum eligible compensation: $245,000.
401 (k) Candidates:
  • Employers who wish to have the responsibility of funding retirement belong to their employees.
  • Employers who are too large to open or maintain a SIMPLE IRA plan.
  • Profitable and growing companies who wish to start a retirement plan and can afford to maintain one.
  • Employers with a large number of highly compensated employees.
  • Employers who have not been able to make consistent annual contributions to their profit sharing plan.
  • Employers who believe their defined benefit plan is getting to expensive to maintain.

Contact a LPL Investment Consultant to go over your options for retirement.

Financial Advisors of LPL Financial are Registered Representatives with, and Securities, Advisory Services and Insurance Products are offered through LPL Financial and its affiliates, Member FINRA/SIPC. LPL Financial is not a registered broker/dealer. Investments are: Not FDIC insured, may lose value, are not bank guaranteed, and are not obligations of LPL Financial. LPL Branch Office located at 1311 Carolina Ave, Washington, North Carolina 27889. Investment Advisory Services offered through LPL Financial, a SEC Registered Investment Advisor


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