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MT1
Visitor II

401k tax question

Hi, we are setting up a 401k plan here at work. We would like to do all the work ourselves, and not use an outside advisor or mutual fund company. To start, the weekly 401k funds for each individual will be going into a savings account at a bank (and eventually into CDs). The bank will report the interest paid out as taxable income. How can we report to the IRS that this interest is from a 401k plan and not taxable? Is this possible, or do we have to use an outside company to manage this plan? Thank you.

1 Comment
AJ
Member III

401k tax question

The administrative and legal requirements for managing a 401k are anything but simple.  Professional assistance is often needed for these accounts.  Also, please note that CD investments, while safe, will not usually generate the rates of return that your employees will need to grow their retirement savings.   CDs can often lose purchasing power due to inflation.  Offering some diversified mix of stocks and bonds is typically recommended for retirement accounts. Here is the IRS link to get you started: https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-qualification-requirements