Category: Zakat
Fatwa#: 38459
Asked Country: United States

Answered Date: Sep 03,2017

Title: 401K Zakaat

Question

AsalamoAlaikum , 

I have questions about Zakat on 401K retirement account. 

 

I just came to know now that we have to pay Zakat on the money I possess in retirement account. I have this 401 K account for almost 5 years and did not knew until now that I have to pay Zakat. I have made intention to pay Zakat on it from now onwards but what about the previous years . Are those forgiven knowing that I was not aware of this ? Or I have to pay Zakat for all those previous years ? If I do have to pay for previous years then how will I do that ? 

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

At the outset, it is important to point out that a 401k investment must be Shariah compliant. You may refer to the following link for more information on the Shariah compliancy of a 401k investment.  

http://www.askimam.org/public/question_detail/29670

There are two components of a 401k retirement investment.

  1. The employee’s contribution
  2. The employer’s contribution

The employee’s contribution will be zakātable according to his financial situation. If the investment amount along with other zakātable assets is equivalent to the threshold of zakāt or more than that and the employee does not have liabilities equivalent to or more than that amount, then that amount will be zakātable.  

 

If the employer’s contribution enters into the employee’s ownership which is termed as “vested”, then the employee becomes the bonafide owner of the employer’s contribution. In that instance too, the vested amount will be zakātable according to the employee’s financial situation as explained above.

 

Consider the following example:

The employee’s contribution is $10,000.00 and the employer’s contribution is $5000.00. However, only $2500.00 out of the $5000.00 is “vested”. There will be zakat on $12,500.00 only. 

 

If your zakātable assets for the last five years have reached the zakāt quantum (nisāb) after subtracting liabilities, then zakāt will have to be paid on the 401k investment amount for the last five years. You may check the records of the 401K you have from the last five years and pay zakāt accordingly. Alternatively, you may pay zakāt when you withdraw the funds. This will require great care in preserving the records.[1][2][3]

 

And Allah Ta’āla Knows Best

Tahmid Chowdhury

Student Darul Iftaa

New York, USA

Checked and Approved by,

Mufti Ebrahim Desai. 

  



[1]

“By definition, a 401(k) plan is an arrangement that allows an employee to choose between taking compensation in cash or deferring a percentage of it to a 401(k) account under the plan.”

 

“401(k) plans are a type of defined-contribution plan, which means that a participant's balance is determined by contributions made to the plan and the performance of plan investments.”

 

http://www.investopedia.com/articles/retirement/08/401k-info.asp

 

“You have to choose among the investment choices - typically mutual funds - that the plan offers. While your company may give you information about the funds, you'll need to figure out which ones are best for you. Since you're bearing all the risk, it's important that you choose wisely.”

http://money.cnn.com/retirement/guide/401k_basics.moneymag/index3.htm

 

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting

 

بدائع الصنائع في ترتيب الشرائع (2/ 11)

(ومنها) كون المال ناميا؛ لأن معنى الزكاة وهو النماء لا يحصل إلا من المال النامي ولسنا نعني به حقيقة النماء؛ لأن ذلك غير معتبر وإنما نعني به كون المال معدا للاستنماء بالتجارة أو بالإسامة

 

الدر المختار وحاشية ابن عابدين (رد المحتار) (2/ 263)

(قوله نام ولو تقديرا) النماء في اللغة بالمد: الزيادة، والقصر بالهمز خطأ، يقال: نما المال ينمي نماء وينمو نموا وأنماه الله - تعالى - كذا في المغرب. وفي الشرع: هو نوعان: حقيقي وتقديري؛ فالحقيقي الزيادة بالتوالد والتناسل والتجارات، والتقديري تمكنه من الزيادة بكون المال في يده أو يد نائبه بحر

 

الدر المختار وحاشية ابن عابدين (رد المحتار) (2/ 266)

(قوله لعدم النمو) علة لقوله ولا في مال مفقود إلخ أفاد به أنه من محترزات قوله نام، ولو تقديرا لأنه غير متمكن من الزيادة لعدم كونه في يده أو يد نائبه

 

 

[2]

بدائع الصنائع في ترتيب الشرائع (1/ 135)

أن الذي أسلم في دار الحرب منع عنه العلم لانعدام سبب العلم في حقه، ولا وجوب على من منع عنه العلم كما لا وجوب على من منع عنه القدرة بمنع سببها، بخلاف الذي أسلم في دار الإسلام؛ لأنه ضيع العلم حيث لم يسأل المسلمين عن شرائع الدين مع تمكنه من السؤال، والوجوب متحقق في حق من ضيع العلم كما يتحقق في حق من ضيع القدرة، ولم يوجد التضييع ههنا إذ لا يوجد في الحرب من يسأله عن شرائع الإسلام، حتى لو وجد ولم يسأله يجب عليه، ويؤاخذ بالقضاء إذا علم بعد ذلك؛ لأنه ضيع العلم وما منع منه كالذي أسلم في دار الإسلام

 

[3]

المجلة (ص: 283)

مادة 1459 يصح 108 أن يوكل 1449 أحد غيره في الخصوصات التي يقدر على إجرائها بالذات وبإيفاء واستيفاء كل حق متعلق بالمعاملات مثلا لو وكل أحد غيره بالبيع 120 والشراء والإيجار 404 والإستئجار 404 والرهن 701 والإرتهان 702 والإيداع 764 والاستيداع والهبة 833 والإتهاب 833 والصلح 1531 والإبراء 1536 والإقرار 1572 والدعوى 1613 وطلب الشفعة 950 والقسمة 1114 وإيفاء الديون 158 واستيفائها وقبض المال 126 يجوز ولكن يلزم أن يكون الموكل به 1449 معلوما

الدر المختار شرح تنوير الأبصار وجامع البحار (ص: 500)

(هلك المبيع من يده قبل حبسه هلك من مال موكله ولم يسقط الثمن) لان يده كيده

 

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