Is A 401K Qualified Or Nonqualified?

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   David G. Pipes, CLU®, RICP®

   Business Development Officer, T.D. McNeil Insurance Services, Fresno, California

   401(k) refers to the section in the Internal Revenue Code (IRC) that permits employers to establish defined contribution plans for their employees. These plans qualify for special treatment under the IRC. Basically money can be contributed to a 401(k) before it is taxed. This reduces the amount of currently taxed income. The money held in the 401(k) can grow without incurring taxation. However, when funds are removed from the 401(k) plan, the proceeds will be taxed as ordinary income except a contribution of after-tax income.

   Answered on September 11, 2014

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