Is a company allowed to give employees an option for a bonus to be paid out as a 401k match or cash?
"This has to do with the type of plan offered: is it a 401(k) plan or a profit-sharing plan, or both? If it's 401(k) I believe the IRS will see this distribution as elective and count towards the employee's annual elective contribution limit. If it's profit sharing the distribution would be counted toward the employer's portion of the limit. However -- profit sharing plans have a formula that's standard across the board and applied to all employees. i.e. 3% of company profits given equally to all employees. One of the benefits of the profit sharing plans is also that you can use a vesting schedule. I'd consult your accountant to see how this specifically impacts your business - but in the case you describe this sounds like an elective deferral choice by an employee and I don't see how (or why) you'd make this decision for them. Give them the bonus and let them choose how it's paid out. Edit: in re-reading your question it actually sounds like you're wanting to setup a profit sharing type situation - but again, heed what I said above. You decide the amount of ""profit"" - but you also have to set an equation that applies across the board. There is more complication to it than this brief explanation and I'd consult your accountant to see how it applies in your situation." I have worked for companies that have done this. One did have a match and the other did not. When they figured their profit at the end of the year a portion was given to the employees as a 401K deposit.  retirement-topics-401k-and-profit-sharing-plan-contribution-limits Total annual contributions (annual additions) to all of your accounts   in plans maintained by one employer (and any related employer) are   limited. The limit applies to the total of: elective deferrals employer matching contributions employer nonelective contributions allocations of forfeitures The annual additions paid to a participant’s account cannot exceed the   lesser of: 100% of the participant's compensation, or $54,000 ($60,000 including catch-up contributions) for 2017;  $53,000   ($59,000 including catch-up contributions) for 2016. So as long as everything stays below that $54,000 limit you are good. In one case the decision was made by the company for the employee, the other company gave us the option of bonus check or 401K. I heard that most of the employees wanted the money in the 401K.
There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly  mentioned as a deduction  on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive  the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates.  (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a  no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did  not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees.  As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish). You will want to focus on how much is needed for retirement, and what types of investments within the current 401K offerings will get you there. Also will need to discuss non-401K investments such as an IRA, college savings, savings for a house, and an emergency fund.  The 401K should be a part of your overall financial picture, how much you invest in the 401K depends on the options you have (Roth 401K available), how much matching (some a little or a lot), and your family plans.  You have a few choices:  Your company through the 401K provider may provide this service. They may have limited knowledge in what non-401K funds you should invest in, but should be able to discuss types of investment. Fee only planner. They will be able to discus types of investments, and give you some suggestions. Because they don't work on a commission they will not make the investment for you. You need to be able to make the actual selection of investments, so make sure you get criteria to focus on as part of the package.  Commission based planner. Will make money off your investment choices. May steer you towards investments that their company offers or ones that offer them the best commissions in that investment type. If the 401K doesn't use funds that the planner can research you will need to provide a copy of the prospectus provided by the 401K. My suggestion is the fee only planner. They balance the limited focus of the 401K company without limiting themselves to the funds their company sells. Before sitting down with the planner get in writing how they fee structure works. A flat fee or hourly fee planner will be expecting you to do all the investment work. This is what you want. Let the fee only planner help you define your plan. But also reanalyze the plan every few years as your needs change. Most companies put the company match in your account each paycheck, but your are not generally vested for the match. If you leave before the specified time period then they pull back part of the matching funds.  I knew somebody who did something similar back in the 1980's with their 401K. They put in 8% of their paycheck after taxes; a 100% match was deposited; then they pulled out the employees contribution every quarter. They did this for the 10 years I knew them. It avoided any tax implications, and they were still saving 8% of their pay for retirement. Make sure you can really do what you plan on doing: Look at the maximum loan length and the maximum loan amount.   From the IRS- retirement plans faqs regarding loans A qualified plan may, but is not required to provide for loans. If a   plan provides for loans, the plan may limit the amount that can be   taken as a loan. The maximum amount that the plan can permit as a loan   is (1) the greater of $10,000 or 50% of your vested account balance,   or (2) $50,000, whichever is less ... A plan that provides for loans must specify the procedures for   applying for a loan and the repayment terms for the loan. Repayment of   the loan must occur within 5 years, and payments must be made in   substantially equal payments that include principal and interest and   that are paid at least quarterly.  Loan repayments are not plan   contributions. The referenced documents also discuss the option regarding multiple loans, and the maximum amount of all active and recent loans  Having a 401K loan will still count against the maximum amount of monthly payments you can afford. Also check the interest rate, and yes they required to charge interest.  Some companies will not allow you to make contributions to a 401K while you have an outstanding loan. If that is true with your company then you will miss out on the matching funds. the cash is not penalty free. if you take up loans from the policy to pay for retirement growth essentially stops and the interest will eat away policy value over time. so instead of gaining 7-8 % per year and taking withdrawals, you would be taking loans and losing whatever the interest rate is.  Dividends are just the profits made from the company which is why its tax free. its considered a return of premium. you are just overpaying for the policy by its dividend rate.   whole life is a great vehicle for some situations, but it always comes after a 401k or other retirement savings. whole life doesnt even begin to make sense imo until you are making a few hundred thousand a year and need it for a business buy sell agreement or legacy money to leave children/grandchildren.  it doesnt scale well to lower incomes. My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options.  Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers.  My current employer offers the same terms, but there's no vesting schedule. "I agree with the other answers that it is a benefit, but wanted to add another explanation for this: Also, why a company would prefer matching someone's contributions (and   given him or her additional free money) instead of just offering a   simple raise? In addition to a match being a benefit that is part of your total compensation, 401ks have special rules for Highly Compensated Employees.  If the lower paid employees do not contribute, the ""Highly Compensated Employees"" do not get to take full advantage of the 401k.   By offering a match, more lower paid employees will take advantage of a 401k program allowing more Highly Compensated Employees to also take advantage of the program." One factor to consider is that some employers have a 401k contribution match policy that only allows a certain percentage of any given paycheck to be matched. So if the company is willing to match 4% of each paycheck, you could run into a problem here where you lose out on some of your company match. For example, suppose you get a $20,000 bonus. You can contribute $18,000 per year to your 401k and this bonus could be a nice way to knock most of that out and then take home your full paycheck the rest of the year. Sounds pretty nice, but there's a problem. The company will only match 4% of your $20,000 ($800) when they otherwise would have matched up to 4% of your annual salary ($4,000 if you're making $100,000 in this example). I'd say it's definitely worth it to make a big contribution to your 401k when you get a bonus as it's an easy way to get a lot of money in there without really feeling a loss (since it's extra money on top of your normal paycheck). But I'd definitely be careful about this situation. You don't want to throw away free money. To avoid this problem, make sure that you leave enough of your annual limit so you can contribute enough to get your 4% company match on every paycheck of the year.