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<<I wish that my company would offer a 401(k) plan, but it don't.

It does offer company stock as a retirement plan. The way the system works is that at the end of each fiscal year, the company contributes a percentage of my annual salary to the plan. The precentage rate typically varies between 5 and 15 depending on how well the company does each year. This plan does not allow the employees to contribute any money.

When I asked the president of the company why, he said that at the time they set up the retirement plan, it was against the law to offer both the company stock plan and a 401(k) plan.

Does anyone if this was ever true or if it is still true?

If it is possible to have both plans, how would that work with a 401(k) plan if an employee wanted to contribute the maximum percentage allowable, since the percentage contributed to the stock plan varies each year?

I would really like to have a 401(k) plan, even if it was completely employee based without any employer contributions.



Yes, Chris, until about 1981 that was true. In the 1970's, there were less than 1,000 plans in existance that permitted a salary reduction cash or deferred arrangement. Then the rules were liberalized by the Congress and the IRS, and 401ks took off. Obviously, your company kept it's old profit sharing plan and didn't join the crowd by adding a 401k provision.

Be assured it is indeed possible to have both a profit sharing and 401k arrangement in the same plan. Your firm would have to modify its plan documents to incorporate the 401k, but nothing says it can't do so. However, the modification will require an expenditure of funds and ratification by the board of directors. That may be something the company may not want to do. All you can do is show there is a consensus among employees that this is a desirable course of action, and then ask that the company consider it. Nothing ventured, nothing gained, ya know.

As far as operation, the company can still contribute it's profit sharing like it does now, and you can contribute part of your salary on a tax deferred basis just like any other 401k plan works.

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