BizTerm Definition
401(k) plan - Legal
Full Definition

A deferred compensation savings program in which employees invest part of their wages, sometimes with added employer contributions, to save on taxes. The 401(k) contributions are invested--usually according to the employee's direction--in savings accounts, money market funds, stocks, bonds and mutual funds. Income taxes on the amount invested and the amount earned are not due in the year earned, but when the employee withdraws money from the fund, usually at retirement.


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