401(k) PLANS

Employees voluntarily elect to make pre-tax contributions through payroll deductions up to an annual maximum limit ($16,500 in 2009). The plan may also permit employees age 50 and older to make additional "catch-up contributions" up to an annual maximum limit ($5,500 in 2009).

Often the employer will match a portion of the amount deferred by the employee, e.g., a 25% match on the first 4% deferred by the employee. Because a 401(k) plan is a type of profit-sharing plan, profit-sharing contributions may be made in addition to or instead of matching contributions.

Employee and employer matching contributions are subject to a special nondiscrimination test which limits how much the group of employees referred to as "Highly Compensated Employees" can defer based on the amount deferred by the "Non-Highly Compensated Employees." In general, employees who fall into the following categories are considered Highly Compensated Employees:

• A more than 5% owner of the employer at any time during the current plan year or preceding plan year (stock attribution rules apply which treat an individual as owning stock owned by his spouse, children, grandchildren or parents) or;

• An employee who received compensation in excess of the indexed limit in the preceding plan year ($110,000 for 2009). The employer may elect that this group be limited to the top 20% of employees based on compensation.