An employer-sponsored savings plan that allows employees to contribute a portion of their gross salary to a savings or profit-sharing plan. Employee contributions and income earned on the plan are tax-deferred until withdrawn at age 59-1/2. Money directed to the plan may be partially matched by the employer, and investment earnings within the plan accumulate tax-free until they are withdrawn. The 401(k) is named for the section of the federal tax code that authorizes it.
