Investment Dictionary

401(k)

A section of the Internal Revenue Code (IRC) that created a tax-deferred retirement plan for corporate employers. It is available to governmental employers who adopted plans prior to 1989. Certain non-profit organizations can also have these plans. Voluntary contributions must be deducted from an employee\'s paycheck. Employer contributions and transfers/rollovers are other ways that a 401(k) account can be funded. A 401(k) account can be invested in a wide array of investments. A 401(k) plan is the responsibility of the employer under federal tax and labor law. This employer responsibility is greater than with 403(b) plans. Because of this involvement an employer has fiduciary responsibility for the 401(k) plan.

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