ajs@hpfcla.UUCP (03/09/84)
Here's a "new thing" that HP, for one, is starting to take advantage of.
It's called "401(k)", and it lets employees put some percentage of their
gross pay into a tax-deferred account in the form of stock. (Right now
the limit is 6%.) The company adds a dollar for every three contributed.
The money is converted to stock at current rates as it's added, so there
is growth potential in the account that way. All stock dividends are
automatically added to the account. None of the contributions are
taxable, not even dividend reinvestments.
You can't touch the money except on termination, retirement, death, age
59.5, or financial hardship. If you have been in the program at least
five years, you can use 10-year forward averaging on the payout (which
cannot be taken as an annuity).
That is pretty much the gist of it, though of course there are many more
rules and stipulations. One of the most interesting is...
In the future, subject to some restrictions, you can borrow from the
account and pay the "loan" back over four years via payroll deductions.
The interest on the loan is tax-deductible in the current year, and all
loan payments (principle plus interest) return to the account. This lets
you reduce your current taxes even further while increasing the amount of
income you can defer.
Neat idea, hey?
Alan Silverstein, Hewlett-Packard Fort Collins Systems Division, Colorado
{ihnp4 | hplabs}!hpfcla!ajs, 303-226-3800 x3053, N 40 31'31" W 105 00'43"