Do I have to provide my employees with the option to purchase company stock with their 401(k) Plan contributions?

Yes – Internal Revenue Code Section 401 (a)(4) provides that, under a qualified retirement plan, contributions or benefits provided under the plan must not discriminate in favor of highly compensated employees (HCEs). The issue of discrimination could arise if the plan is designed in a manner that the Benefits, Rights, and Features (“BRF) is not made available to any non-highly compensated employees (“NHCEs”). Therefore, in order for the new 401(k) to not discriminate against certain employees, it is important that the employees are provided with the option to purchase company stock just as the owner did so that the BRFs of the plan are made available to all employees.

Please contact one of our IRA Experts at 800-472-0646 for more information.


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