401 (k) plan

401 (k) plan
   A savings plan with deferred compensation in which employees invest part of their wages (sometimes with employers also contributing) as a way of saving on taxes. The contributions are invested, usually as the employee chooses, in various instruments, including savings accounts, money market funds, shares, bonds and mutual funds. Income taxes on the investments are not due in the year earned, but when the employee withdraws money from the fund, usually at retirement-when his or her tax liability will be lower. This plan, and others, are described in section 401 of the Tax Code.

Business law dictionary. 2015.

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