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 Louisiana, 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 a 401(k) plan include the ability for employees to make elective salary deferrals which are excluded from their taxable income, with the exception of Roth 401(k) contributions, which are taxed upfront. Employers have the option to make contributions to their employees' 401(k) accounts, which can be matched up to a certain percentage. Upon retirement, the distributions from a traditional 401(k) plan, including any earnings, are subject to income tax. However, qualified distributions from a Roth 401(k) are generally tax-free, as taxes have already been paid on the contributions. These plans are governed by federal law under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, and while the state of Louisiana may have its own tax implications for retirement income, the primary regulation of 401(k) plans is at the federal level.