Salem Corporation is considering implementing a 401k program for its employees. The program plan will include the company matching at 50% of the employee Solution 401(k) is the qualified defined contribution pension plan account. Qualified plan is the one which has strict requirements such as not discerning in favor of highly compensated individuals, specified funding and vesting requirements, operated and formed and for exclusive benefits of employees. Both employer and employees receive significant tax benefits in qualified plan. Employer receives an immediate tax benefit deduction for pension and profit sharing contributions made on behalf of employees. Employee is not taxed on either employee contribution or employer contributions or earning of the plan (interest, dividend) until the funds is withdrawn from the plan at retirement. Funds invested in a qualified plan are tax free during employee .

1. Salem Corporation is considering implementing a 401k program for its employees. The program
plan will include the company matching at 50% of the employee
Solution
401(k) is the qualified defined contribution pension plan account. Qualified plan is the one which
has strict requirements such as not discerning in favor of highly compensated individuals,
specified funding and vesting requirements, operated and formed and for exclusive benefits of
employees. Both employer and employees receive significant tax benefits in qualified plan.
Employer receives an immediate tax benefit deduction for pension and profit sharing
contributions made on behalf of employees.
Employee is not taxed on either employee contribution or employer contributions or earning of
the plan (interest, dividend) until the funds is withdrawn from the plan at retirement. Funds
invested in a qualified plan are tax free during employee