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Other Ascensus retirement services include individual 401(k), business 401(k), MEP 401(k), PEP 401(k), defined benefit plans, SEP IRA, profit-sharing, and non-qualified deferred compensation programs.
Deferred compensation is a written agreement between an employer and an employee where the employee voluntarily agrees to have part of their compensation withheld by the company, invested on their behalf, and given to them at some pre-specified point in the future.
Ted Benna was among the first to establish a 401(k) plan, creating it at his own employer, the Johnson Companies (today doing business as Johnson Kendall & Johnson). [7] [8] Benna was trying to reduce the taxes due on an deferred-compensation bonus plan for bank executives, at a time when the top marginal income tax rate was 70%. [9]
The 457 plan is a type of nonqualified, [1] [2] tax advantaged deferred-compensation retirement plan that is available for governmental and certain nongovernmental employers in the United States. The employer provides the plan and the employee defers compensation into it on a pre tax or after-tax (Roth) basis.
Both qualified and non-qualified deferred compensation plans can have vesting periods. Qualified plans are required to have vesting periods. Non-qualified plans are not, but occasionally do.
Contributions can grow tax-deferred until they're withdrawn, and then they're taxed as regular income. Any withdrawal before age 59 ½ is subject to a bonus penalty tax of 10 percent. Roth 401(k)
A non-qualified deferred compensation plan or agreement simply defers the payment of a portion of the employee's compensation to a future date. The amounts are held back (deferred) while the employee is working for the company, and are paid out to the employee when he or she separates from service, becomes disabled, dies, etc.
CalPERS is responsible for a deferred compensation retirement plan and two other plans to supplement income after retirement or permanent separation from State employment. As of December 2014: [3] The CalPERS 457 Plan serves 27,526 participants and had $1.296 billion in assets.