A Section 104 adoption agreement is a legal document that outlines the terms and conditions of an agreement between an employer and an employee. The agreement pertains to the adoption of a certain type of retirement plan, such as a defined benefit, cash balance, or combination plan.

Section 104 of the Internal Revenue Code provides guidance on the specific requirements for adoption agreements. The document serves as a contract between the employer and the employee and outlines the rules and regulations for the retirement plan.

In order for an employee to participate in the retirement plan, they must sign the adoption agreement. The agreement includes several important pieces of information, such as the eligibility requirements for participation in the plan, the vesting schedule, the employer’s contribution limits, and the employee’s contribution limits.

Additionally, the agreement outlines the different investment options available to the employee, as well as the distribution options once the employee reaches retirement age. It is the responsibility of the employer to ensure that the retirement plan meets all of the requirements set forth in the Internal Revenue Code.

One benefit of a Section 104 adoption agreement is that it allows for customization of the retirement plan to fit the specific needs of the employer and the employees. For example, the employer may choose to offer a certain type of investment option or set a certain contribution limit based on the company’s financial situation.

In conclusion, a Section 104 adoption agreement is an important legal document that outlines the terms and conditions of an agreement between an employer and employee regarding their retirement plan. It provides guidance on eligibility, vesting, contribution limits, investment options, and distribution options. Employers should work with their legal and financial advisors to ensure that their adoption agreement meets all of the requirements set forth in the Internal Revenue Code.