401(k)

• No employee is ever mandated to participate in a 401(k) program. The account is, in all cases, an optional benefit, and it will never be a condition of employment. If an employee does choose to participate, a designated portion of his paycheck is withdrawn each pay period and placed in the account. This money is used to purchase investments, such as mutual funds and company stock, which will, it is hoped, appreciate in value.
  
  

Company Policy

• Although an employee does not have to participate in a company's 401(k) policy, he may not be provided with an alternative plan to saving for retirement. While a company cannot legally prevent a person from choosing to opt out of the 401(k) program, the company is not obligated to provide the person with any other means of saving for retirement. In addition, a company will not provide the money it would have contributed in the form of a matching 401(k) contribution to the employee in the form of cash.
  
  

Early Withdrawl Rules

• A person who signs up for a 401(k) program and contributes money will not be allowed to withdraw the money before the age of 59 1/2 without facing severe penalties imposed by the Internal Revenue Service in the form of additional taxes on the income. Once money has been deposited in a 401(k) account, it cannot be withdrawn without penalty, except in the case of certain severe hardships, such as certain medical expenses.
  
  

Considerations

• While an employee can opt out of company's 401(k) program, there may be certain rules relating to opting out. For example, a person may have to give some advance notice to an employer if he wishes to opt out of his program. Similarly, an employee who chooses to opt out of a 401(k) program after making contributions cannot retroactively withdraw the money that he has already placed in the account.