401(a) Retirement Plans are sometimes referred to as Teacher Incentive and Teacher Matching programs.
Basically in these type 401a plans the school district employer decides on some sort of match provision or the employer makes some sort of direct contribution to the plan.
Unlike 403b plans, no employee contributions are permitted in a 401a plan.
Each state has specific laws and different rules pertaining to these 401a plans.
401a plans can be created in various flexible and different ways since there are no constraining employer discrimination rules on the employer’s contribution.
Given this, specific groups of employees can be given benefits quite different from other groups of employees in the same organization, or the 401a plan can be structured to include all employees.
Various elements such as vesting, eligibility, job performance, education and teaching specialities, attendance etc. can be incorporated in the 401a plan to fit and meet the particular needs of the employer.
Upon an employee departure from employment, monies that are non-vested can be used to offset other expenses and pay for unused sick leave can be contributed to the 401a plan.
Distributions from the 401a plan can take several forms, including lump sum, rollover or an annuity type payment.
Certain FICA and Medicare tax advantages pertain to these type plans.
401a plans are particularly attractive when used as an incentive for retaining key specific groups of educators.
