A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Some of the key features of 401k plans are:

• Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).

• Employers can contribute to employees’ accounts.

• Distributions—including earnings—are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).

In Delaware, as in other states, a 401(k) plan is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. The contributions made by employees towards a 401(k) are not taxed until the employee withdraws that money, typically after retirement. Employers may also contribute to the 401(k) plans, which can be either matching the employee's contribution up to a certain percentage or a non-elective contribution. The earnings in a 401(k) plan are not taxed until the employee takes them out of the account. Delaware follows federal guidelines under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, which regulate the operation of 401(k) plans. It's important to note that while the state of Delaware does not have specific laws that alter the federal treatment of 401(k) plans, state tax treatment of these plans follows federal guidelines, and Delaware state income tax will apply to 401(k) distributions at retirement.