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 Hawaii, as in all 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 key features of 401(k) plans include the ability for employees to make elective salary deferrals which are excluded from their taxable income, except for contributions to designated Roth accounts which are made with after-tax dollars. Employers have the option to make contributions to their employees' 401(k) accounts, which can be matched up to a certain percentage. Upon retirement, distributions from traditional 401(k) accounts are taxed as ordinary income, while qualified distributions from Roth accounts are tax-free. The specific regulations governing 401(k) plans are primarily established at the federal level through the Internal Revenue Service (IRS) and the Employee Retirement Income Security Act (ERISA). Hawaii follows these federal guidelines and does not have unique state-specific rules for 401(k) plans.