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 Georgia, 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. Taxes aren't paid until the money is withdrawn from the account. Employees in Georgia can choose to defer a portion of their salary into their 401(k), which reduces their taxable income for the year. These elective deferrals go into individual accounts set up under the plan. Employers may also make contributions to their employees' 401(k) accounts, which can be either matching contributions, non-elective contributions, or both. Upon retirement, or when the employee takes distributions from the plan, the funds, including any earnings on investments, are subject to income tax. However, distributions from a designated Roth 401(k) account are generally tax-free, provided certain conditions are met. The specific rules and regulations governing 401(k) plans are established by federal law, particularly under the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA), and are not significantly altered by Georgia state law.