national 401k day 2021

it’s a day for sponsors of 401(k) plans to provide information and communication to those participating in their plans and to let participants know the importance of saving for retirement and how to do it. the psca provides 401(k) materials year-round—not just on national 401(k) day—that sponsors of plans may use with their employees. 401(k)s were created to be supplements for regular pensions, but have since replaced pensions as the main form of retirement savings. the maximum amount that an individual can contribute to their 401(k) depends on their plan and salary, as well as government guidelines. as of 2019, up to $19,000 can be deferred tax-free into a 401(k). the groundwork for 401(k)s was set with the revenue act of 1978. going into effect on january 1, 1980, it had a provision that allowed tax-deferred compensation for bonuses and stock options. as previously mentioned, dividends, interest, and capital gains aren’t taxed until they are disbursed; they are allowed to compound tax-free while they are in the account.

another advantage of 401(k)s is there is a lot of flexibility as to how they can be invested, and employees can customize the investment of their assets to their liking. an additional advantage that 401(k)s have is their portability. if an employee has a 401(k) and moves to a new job, they can often leave their assets in their current plan, complete a 401(k) rollover into their new employer’s 401(k) plan, or complete a rollover into an individual retirement account (ira). lastly, both loan and hardship withdrawals are possible with 401(k)s. with a loan, an employee can use funds from their 401(k) without cashing it out. loans are usually limited to 50% of the balance or up to $50,000 and must be paid back within five years, unless the loan is taken out for a home. if you are an employer that sponsors 401(k)s for your employees, you should use the day to provide information for your employees about their plans. if you are an employee with a 401(k), today is an excellent day to review it.

the friday following labor day (monday) was chosen so employees can “start the week with labor day and end the week with retirement.” this holiday promotes retirement savings education and psca encourages companies to give their employees the information about their 401(k) in fun, easy-to-understand ways. increasing longevity, overwhelming debt, and rising health care costs can challenge the ability of the american worker to prepare for retirement. further, plan sponsors that offer 401(k) plans have an obligation to provide employees with education and the tools to help them prepare for retirement.

all materials are available on psca’s website and can be downloaded free of charge to use—for the upcoming 401(k) day on september 10, or for use later in the year. past campaigns are also available to psca members at the retirement advantage, inc. (tra) is a premier third-party administrator (tpa) that specializes in administration, consultation and compliance of retirement plans for businesses nationwide. for over two decades, tra has been committed to delivering results for our business partners, plan sponsors, and participants so that they can achieve their financial goals. tra is one of the largest independently owned, privately held third-party administrators in the nation because we focus on your clients’ success.

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