Section 401(k) of the Internal Revenue Code provides for the establishment of employer-sponsored, salary-reduction retirement savings plans. The employee defers a percentage of income on a tax-deferred basis. The employer often matches all or part of the employee's amount. All earnings are also tax-deferred.
a qualified retirement plan established under IRC Section 401(k) whereby an employee is allowed to defer a portion of his or her salary without current income taxation into an employer-sponsored retirement plan
A qualified profit sharing or thrift plan that allows participants the option of putting money into the plan or receiving funds as cash. The employee can voluntarily elect to have his or her salary reduced up to some maximum limit, which is then invested in the employer's Section 401(k) plan.