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Fatwa Answer

Question ID: 1108 Category: Dealings and Transactions
question about 401k retirement plan

Salam,

I have few question about my 401k retirement plan here are some details;
My employer contributes 3% of my weekly paycheck into my 401k retirement plan, regardless i contribute in it or not.

Question1, is it permissible for me to take and use this money, thinking as gift or benefit from my employer with 0% contribution of mine?

Question2, also if i contribute 3% of my weekly paycheck (voluntary) into 401k, my employer still contribute 3% of my weekly paycheck, is this condition right to for me to contribute?

Question3, also if i contribute 6% (voluntary) of my weekly paycheck into my 401k, than my employer contributes 9% of my weekly paycheck into 401k. is this condition right for me to contribute too??

Note:

I have no information and not possible to get the information about where they spending my money if i contribute.
But even if i contribute 0% they still contribute 3% of my weekly payckeck into my 401k.

Now which condition is allowed for me according to Quran and Sunnah to contribute or do not contribute, to take advantage of this retirement plan, and is this contributed money is permissible for me to take and use when needed.

If you have any question, you can email me on amadquddos@gmail.com

Thank you.

الجواب وباللہ التوفیق

Some companies have a policy of involuntary withdrawal of a certain percentage of money from the weekly or bi-weekly paychecks of their employees, which is payable to the employees upon their retirement. In addition to this deposited money, the company also offers an additional amount to the employees upon their retirement, which is considered a gift or bonus and therefore is permissible to take.

For voluntary investment to be legal, it is important to satisfy below conditions:

  1. Investment company does not deal in impermissible “haram” business.
  2. Company’s total assets and property are not in the form of cash.
  3. If the company deals in interest, voice should be raised against it during yearly meetings.
  4. When the profits are realized, estimate the profit accrued through interest based deposit, set that money aside and pay in a charity fund “sadaqa”.
  5. If above conditions are ensured, the investment will be considered legal otherwise not.

(اسلام اور جدید معاشی مسائل از مفتی تقی عثمانی دامت برکاتہم:۳/۲۳)

In view of the given circumstances, it appears that the required conditions will be difficult to fulfil and hence the voluntary investment will not be considered legal.

فقط واللہ اعلم بالصواب

Question ID: 1108 Category: Dealings and Transactions