Type of Plan: Employer

2024 Contribution Limits: $23,000 ($30,500 if age 50 and over)

Plan Establishment: A plan may be set up and funded before the expiration of the extended due date for the taxpayer’s return.

Loans: Generally limited to the lesser of $50,000 or the greater of $10,000 or half the present value of the account.

Special Provisions: Hardship distributions

Premature Distribution Penalty: Yes

RMD Waiver for 2020: See the guide Required Minimum Distributions

Coronavirus-Related Distributions: See the guide Traditional IRA

Cash or deferred arrangements (CODAs), popularly known as “401(k)” plans (referring to the code section that covers such plans) allow an eligible employee to choose whether the employer should pay the employee’s compensation in cash, or instead pay a certain amount of it (on a pre-tax basis) on the employee’s behalf into a qualified trust (the retirement plan) as a means for the employee to save for retirement. However, the amount an employee can elect to defer for a tax year is capped.