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What is a 401(k) plan?

A 401(k) plan is a company sponsored plan that allows employees to defer a portion of their wages into investment options of their choice. Employers have the flexibility to make contributions and can offer some form of matching contributions to those of their employees. The employer contribution flexibility and employee contribution aspects of 401(k) plans are part of the reason so many companies have chosen this form of retirement plan. The employer match and the investment flexibility of many plans are some of the reasons that now over 40 million Americans are choosing to participate in 401(k) plans.