401(k) Plan: US

This 401(k) Plan policy explains how your organization offers and administers a common workplace retirement benefit under federal retirement and tax rules, including the Employee Retirement Income Security Act of 1974 (ERISA) and Internal Revenue Code Section 401(a), which set standards for eligibility, plan administration, disclosures (like the Summary Plan Description), and the tax treatment of employee and employer contributions.

The History Behind 401(k) Plan Policies in the US

Employers started adopting written 401(k) plan policies as Benefits & Perks shifted away from pensions and toward employee-directed retirement savings. ERISA, enacted in 1974 and codified in Title 29, set the baseline rules for private retirement plans and put fiduciary duties on those who run them. A few years later, Congress added Internal Revenue Code Section 401(k), which opened the door for employees to defer part of their pay into a qualified plan on a tax-favored basis. It's also where "401(k)" plans get their name!

401(k)s didn't take off just because the statute existed. The IRS helped legitimize the concept through late-70s and early-80s guidance that treated salary reduction contributions as permissible under Section 401(k), and employers moved quickly because the design was cheaper and more predictable than traditional defined benefit pensions. By the 90s and 2000s, 401(k)s had become the default retirement plan in much of the private sector, which made consistent plan administration, eligibility rules, and contribution practices a day-to-day operational issue for HR and payroll.

Litigation pushed employers to govern plans with more discipline. The Supreme Court's decision in Tibble v. Edison International (2015) reinforced that ERISA fiduciaries have an ongoing duty to monitor plan investments and fees, not a one-and-done obligation at the time of selection. Fee and investment lawsuits kept coming, and regulators kept focusing on disclosures and process. A clear 401(k) plan policy became a helpful tool to prove your organization runs the plan the same way it says it does.

Which Law is this 401(k) Plan Policy Meant to Comply With?

If your organization offers 401(k) plans as a benefit for your US-based employees, you must comply with the federal Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code rules for tax-qualified retirement plans, including 26 U.S.C. Section 401.

How to Write a US-Specific 401(k) Plan Policy

• Start with "why" and introduce the concept, explain that your organization offers a 401(k) to help employees save for retirement through payroll contributions.
• Describe the contribution options available, including traditional (pre-tax) and Roth (after-tax) contributions, subject to applicable tax rules.
• Define who is eligible to participate in the plan.
• Explain how employees get the plan documents and where to find the rules for enrollment, contribution amounts, and account management.
• State whether your organization offers an employer match and summarize the match formula.
• Explain vesting at a high level, including that employees are fully vested in their own contributions and how employer contributions vest.
• Explain how employees can change their contribution elections and note that contribution limits may apply.
• Point employees to the Summary Plan Description (SPD) and a contact for questions, enrollment support, and contribution changes.

When to Include this Policy in Your Employee Handbook

If you have employees in US and your company offers 401(k) plans, it may be helpful to include this policy in your employee handbook. You can also make a more brief mention of your policy in a higher-level "benefits" overview. A clear, employee-friendly policy helps set expectations around who can participate, how contributions and employer matching work, when matching contributions vest, and where employees can find the official plan terms when they have questions.

ERISA states in 29 U.S. Code § 1024(b)(1):

The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, a copy of the summary plan description and all modifications and changes referred to in section 1022(a) of this title.

Your employee handbook doesn't qualify as a summary plan description, but those documents can be long and detailed. It's helpful to give employees a quick overview somewhere.

Other Considerations

None.

Exceptions

None.