Section 26 U.S.C. § 401(k) of the Internal Revenue Code (of 1987) makes provision for a retirement savings plan for employees which allows them to plan and save for their retirement. The plan makes such provisions that employees can have their savings invested while deferring income tax on the savings and the gains/earning till the time of withdrawal. The plan is thus known for the section of its provision, i.e. 401(k).
Retirement plans sponsored by employers are generally of two categories, defined benefit (DB) and defined contributions (DC). The 401(k) plan falls in the DC category where the employee contributions are directly deducted
