This module describes the important characteristics of various participant-directed retirement plans. 401(k) profit sharing plans are covered in detail including discrimination testing requirements such as the ADP and ACP tests, and the requirements for establishing a safe harbor 401(k) plan. Qualified default investment alternatives (QDIAs) are addressed. This module also examines 403(b) plans commonly adopted by tax-exempt organizations and 457(b) plans available to tax-exempt organizations and state and local governments. Designated Roth accounts are covered for all three plan types, 401(k)s, 403(b)s, and 457(b)s.

3–1 Explain the characteristics and requirements of 401(k) profit sharing plans.
3–2 Calculate the ratio percentage, average benefit, ADP, or ACP test for any given 401(k) profit sharing plan.
3–3 Explain the characteristics and requirements of 403(b) plans.
3–4 Explain the characteristics and requirements of Section 457 plans.

About the Author

Kristen MacKenzie, MBA, CFP®, CRPC® is an associate professor at the College for Financial Planning. Kristen has over 20 years of experience in the financial services industry, both as an active financial planner and as a provider of financial education. She graduated from the University of Connecticut with a degree in economics and later received her MBA at the University of Colorado. You can contact Kristen at kristen.mackenzie@cffp.edu.

Complexity Level: Intermediate