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Financial Glossary

4

401(k) plan

A 401(k) plan allows employees to set aside tax-deferred income for retirement. In some cases, employers will match contributions made to the plan. Employers may also add a profit-sharing feature to the plan. If employees withdraw money from the plan before retirement age, they must pay a penalty tax.

403(b) plan

403(b) plans are retirement plans available to certain employees of public schools and universities, cooperative hospital organizations and not-for-profit organizations, as well as some self-employed ministers. Contributions to 403(b) plans are tax-deferred.