401k and the Contribution Limits Set by the U.S. Internal Revenue Code for 2013

A 401k plan is set under the U.S. Internal Revenue Code (IRC) to help its citizens save money for their retirement. Under this retirement plan, a portion of the employee’s salary is deducted by their employers and invests it

in an investment portfolio. Employers are given an option to add additional value to the retirement plan by making contribution or by matching the investment made by employees. Having a 401k plan has multiple benefits including the favorable tax advantage and investment options it gives to employees.

Every year the Internal Revenue Service (IRS) in the U.S. set the maximum contribution that eligible employees can contribute to their 401k retirement plan taking into consideration the inflation rate. The maximum contribution limits set by IRS for 2013 has increased from 17,000 dollars in 2012 to 17,500 dollars in 2013. On the other hand, the catch-up limits designed for employees who are more than 50 years old will remain at 5,500 dollars in 2013. Employees who are highly compensated may have separate or additional 401k limits.

A fidelity bond is one of the requirements set by the U.S. Employee Retirement Income Security Act of 1971 (ERISA) for the 401k retirement plan. 401k fidelity aims to insure its policyholders in case the retirement plan experienced some problem due to dishonesty or fraud caused by the plan’s provider or handler. Any individual who manage funds of 401k plan is required to have a fidelity bond. The minimum requirement set for this type of bond is at least 10% of the plan’s fund and not more than 500,000 dollars.

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