As with other types of retirement plans, a401(k) can permit catch-up provisions for employees age 50 and over. The catch-up amount in 2003 is $2,000 and increases in $1,000 increments until the limit reaches $5,000 in 2006.

Although a 401(k) plan is a retirement plan, you may be permitted access to funds in the plan before retirement. For example, if you are an active employee, your plan may allow you to borrow from the plan. Also, your plan may permit you to make a withdrawal on account of hardship, generally from the funds you contributed. The sponsor may want to encourage participation in the plan, but it cannot make your elective deferrals a condition for the receipt of other benefits, except for matching contributions.

What are employee stock ownership plans (ESOPs)?

Employee stock ownership plans (ESOPs)are a form of defined contribution plan in which the investments are primarily in employer stock. Congress authorized the creation of ESOPs as one method of encouraging employee participation in corporate ownership.

What is the role of the Labor Department in regulating retirement plans?

The Department of Labor enforces Title I of ERISA, which, in part, establishes participants' rights and responsibilities and fiduciaries' duties. However, certain plans are not covered by the protections of Title I. They are:

• Federal, State, or local government plans, including plans of certain international organizations.
• Certain church or church association plans.
• Plans maintained solely to comply with State workers' compensation, unemployment compensation, or disability insurance laws.
• Plans maintained outside the United States primarily for nonresident aliens.
• Unfunded excess benefit plans - plans maintained solely to provide benefits or contributions in excess of those allowable for tax-qualified plans.

The Labor Department's Employee Benefits Security Administration is the agency charged with enforcing the rules governing the conduct of plan managers, investment of plan assets, reporting and disclosure of plan information, enforcement of the fiduciary provisions of the law, and workers' benefit rights and responsibilities.