Aspect of Plan	IRS Allows...	Recommended for most run-it-yourself Low Fee 401(k) systems
Eligibility requirement -- age	anything from none to 21 years of age	21 years of age
Eligibility requirement -- length of service	anything from none to 1 year of service	3 months of service
Eligibility requirement -- union employees	can exclude employees whose employment is governed by a collective bargaining agreement between the employer and employee representatives under which retirement benefits was the subject of good faith bargaining.	exclude employees whose employment is governed by a collective bargaining agreement between the employer and employee representatives under which retirement benefits was the subject of good faith bargaining.
Employer contributions -- matching	cannot make total contributions to any employee account over the annually-adjusted total allowed contribution amount	contact us for details and recommendations
Vesting of employer contributions	full, immediate vesting OR anything less stringent than either: no vesting earned until the person has participated in the plan for five years, then 100% vesting after five years, or 0% vested for the first 2 years, 20% vested after 3 years, 40% vested after 4 years, 60% vested after 5 years, 80% vested after 6 years, and 100% vested after 7 years of participating in the plan.	full, immediate vesting OR Five Year Formula: 20% vested after 1 year of participating in the plan, 40% vested after 2 years, 60% vested after 3 years, 80% vested after 4 years, and 100% vested after 5 years of participating in the plan.
401k loans	inclusion or exclusion allowed	not recommended in plan's first year of operation

Aspect of Plan	Low Fee 401(k) Standard
Plan year	January 1 - December 31
Eligibility commencement	participation begins on the first day of the calendar quarter after the person meets the plan's age and length of service eligibility requirements
Normal retirement age	65
Early retirement age	none
Hardship withdrawals	included (IRS-mandated)
401k loans	allowed, but not mandatory (see Options chart, above)
Employer matching contributions	allowed, but not mandatory (see Options chart, above)
Participant account statements	automatically prepared by the Low Fee 401(k) software EVERY MONTH; participants also receive personal, monthly investment statements from the self-directed brokerage accounts and/or no-load mutual funds holding 401k assets.

401k compliance tests are designed to ensure 401k plans have at least a threshold balance of participation of rank-and-file employees in relation to highly-paid employees.

The IRS offers an alternative means for achieving 401k plan balance: The safe harbor method of 401k plan operation lets 401k plans skip their annual 401k discrimination testing so long as the sponsoring employer meets certain employer 401k contribution requirements (designed to ensure broad participation in the company plan) and provides 100% immediate vesting of the contributions.
The employer must provide annual information to employees explaining the 401k plan's safe harbor provisions and benefits, including that safe harbor contributions cannot be distributed before termination of employment and that they are not eligible for financial hardship withdrawal.

Your Low Fee 401(k) system includes such notification within your customized 401k plan's Summary Plan Description, a document for prospective and active plan participants that's updated at least annually.

As the name implies, a Roth 401(k) combines features of the traditional 401(k) with those of the Roth IRA. The Roth 401(k) is offered by plan sponsors alongside a traditional 401(k). Employees make contributions to the Roth 401(k) in addition to (or as an alternative to) making contributions to their traditional 401(k). Unlike a traditional 401(k) contribution, which is always pre-tax, all Roth 401(k) contributions are made with the employee's after-tax dollars. As with the traditional 401(k), the participant's Roth 401(k) contributions grow tax-free. But unlike traditional 401(k)s, withdrawals taken from the Roth 401(k) during retirement not subject to income tax, provided the account holder is 59 1/2 and the Roth 401(k) contributions have been held in the account for a minimum of five years.

The Roth 401(k) can offer advantages to high-income individuals who haven't been able to contribute to a Roth IRA because of the income restrictions. (Eligibility for 2009 phases out between $105,000 and $120,000 for single filers and $166,000 to $176,000 for those who are married and file jointly).

Roth 401(k) accounts are subject to the contribution limits of regular 401(k)s - $16,500 for 2009, or $22,000 for those 50 or older by the end of the year - allowing individuals to stock away thousands of dollars more in tax-free retirement income than they would through a Roth IRA. (In 2009, Roth IRA contributions are limited to $5,000 a year, or $6,000 for those 50 or older.)

The hitch: Those limits apply to contributions to both types of 401(k) plans, so participants can't save $16,500 in a regular 401(k) and another $16,500 in a Roth 401(k). Employees who are offered this option face a difficult choice: Contribute to a Roth 401(k) and suffer a cut in take-home pay (since contributions are made with after-tax dollars), or stick with a traditional 401(k) and hope that in retirement, their tax rate will be lower than it is now. Alternatively, they could hedge their bets by contributing to both accounts.

If the employee expects tax rates to be the same or higher in retirement than it is now, he or she might be better off with a Roth 401(k). This is likely to be the case with young people who are just starting their careers and expect their income to increase in the future. If the employee is in peak earning and anticipates his or her tax bracket will be lower in retirement, then continuing to use a traditional 401(k) is probably the best option. In reality, of course, things are much more complicated. For one, no one can predict with certainty what tax rates will be in the future, though the general consensus is that they're likely to rise to help the government offset growing budget deficits and pay for Social Security and Medicare.

No mandatory withholding for in-plan conversions of 401(k)s to Roth Rollovers. Plan sponsors who are allowing direct Roth rollovers from 401(k) and 403(b) plans into Roth Rollovers don’t have to worry about mandatory withholding for those “distributions.” According to a notice posted by the Internal Revenue Service on its website, mandatory 20% withholding does not apply to in-plan Roth direct rollovers.

More specifically, the IRS allows participants to make rollovers from their 401(k) and 403(b) plans to their designated Roth accounts (an "in-plan Roth rollover") after September 27, 2010. The taxable amount rolled over is includible in income equally in 2011 and 2012, unless the taxpayer elects to include it in 2010. The additional tax under section 72(t) does not apply to these rollovers.

The IRS says that the amount rolled over should be reported in box 1 (Gross distribution), the taxable amount in box 2a, and any basis in the rollover in box 5 (Employee contributions). Further, Code G in Box 7 on Form 1099-R should be used. The notice goes on to say that distributions made to plan participants in 2010 from designated Roth accounts must be reported on a separate Form 1099-R, and that the portion of a distribution from a designated Roth account that is allocable to an in-plan Roth rollover must be reported on a Form 1099-R. “Report the distribution as you would any other distribution from a designated Roth account; however, in the blank box to the left of box 10, enter the amount of the distribution allocable to the in-plan Roth rollover”.

	Traditional 401(k) Contributions	Roth 401(k) Contributions
When you will pay taxes on your contributions	You pay the tax upon withdrawal. Contributions are tax-deferred, so current taxes are reduced.	You pay regular income tax on your contributions before the money goes into your account. Current taxes are not reduced.
When you will pay taxes on any investment earnings	You pay taxes on the full amount of any distribution, including earnings, at ordinary income tax rates in effect upon withdrawal.	Your contributions have already been taxed, so there is no tax on them and no taxes on any earnings if you take a qualified distribution.
Qualified distribution rules*	Contributions and any earnings remain in account until age 591/2 or a separation from service that qualifies for retirement distributions. Withdrawals are subject to current ordinary income tax at withdrawal (and a 10% tax penalty may apply before age 591/2) unless the tax deferral is continued.	Contributions and earnings are distributed tax-free if they meet the requirements of a qualified distribution; earnings in a non-qualified distribution are subject to current ordinary income tax (and a 10% tax penalty may apply before age 591/2) unless the tax deferral is continued.
Impact of contributions on take-home pay	Since contributions are pre-tax, your current income tax is reduced and each $1 contributed reduces your take-home pay by less than $1.	Because you pay current taxes on your contributions, take-home pay is reduced dollar for dollar by your contributions.
Rollovers from your account	You may roll over your account balance upon termination to a traditional IRA, a 401(k) plan or another qualified employer-sponsored plan.	You may roll over your account balance upon termination to a Roth IRA or another Roth 401(k) or Roth 403(b) account in a qualified employer plan. Note: For purposes of the 5-year rule for qualified distributions, the date of the initial contribution to a Roth IRA governs.
Taxes on employer match, if applicable	Employer matching contributions are made on a pre-tax basis; contributions and any earnings are taxable upon withdrawal.	Same. The employer match is not treated as a Roth contribution.
Required minimum distributions	You must begin required minimum distributions by April 1 of the year following the year in which you reach age 701/2 or at retirement, if later.	You must begin required minimum distributions by April 1 of the year following the year in which you reach age 701/2 or at retirement, if later.
Loan and hardship	Account balances are available for 401(k) loans and hardship withdrawal if the plan allows.	Contributions are available for 401(k) loans and hardship withdrawal if the plan allows.

*For purposes of qualified distributions, disability must meet the definition stated in Internal Revenue Code Section 72(m) (7).

		Services	Notes
	ClearFuture www.morningstar.com/Cover /ClearFuture.html	Bases recommendations on retirement income goals, not risk toleration Derives several potential investment strategies based on investments available and retirement income goals Ongoing projections that include showing potential effects of holding or selling during turbulent market times Integrated with Morningstar reports and information (quick access to "view Morningstar report" on investments being considered)	by Morningstar, the industry leader in providing mutual fund, stock and variable-annuity investment information
	FinancialEngines www.financialengines.com	FOR FREE: Extensive "Monte Carlo" style of modeling that, rather than assuming static investment returns and inflation rates over time, takes into account numerous possible economic cycle scenarios based on varying combinations of future investment returns and inflation rates in determining the probability that the client will reach his/her retirement goals FOR PAYING CLIENTS: Advice on exactly how much to invest in which of your plan's 401k investments to improve your chances of reaching your retirement goals; daily tracking of those investments' performances and their effect on the client's account; ongoing advice about needed changes in the account due to current and projected investment performance and economic cycles Do not counsel on investments outside the 401k but do take any outside holdings into account in making 401k recommendations to client	Computerized modeling system by Nobel Prize-winning economist Bill Sharpe and others Highly touted by the Los Angeles Times (8/5/99), San Francisco Chronicle (11/23/99), and The Wall Street Journal ((8/12/99), among others $28.95 per 3 months (April 2000) Accepts fiduciary responsibility for advice it gives, relieving employers from such responsibility
	mPower (formerly Emergent Advisors) www.mpower.com	Investment guidance for just 401k assets or all retirement assets Customized risk profiling Portfolio tracking and analysis, including a comparison between current and recommended allocation levels Advice on employee stock plans One-year, five-year, at-retirement portfolio simulation	Parent company of 401k Forum (www.401kforum.com), a registered investment advisor Parent company to 401 Kafe (www.401kafe.com), an online community and content site dedicated exclusively to 401k participants nationwide