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 Missouri, 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. This deferral of taxes is a key advantage of the 401(k) plan. Employers in Missouri may also contribute to their employees' 401(k) accounts, which can be matched to a certain percentage of the employee's contribution. These employer contributions can either be subject to a vesting schedule, where the employee gains ownership of the funds over time, or they can be immediately vested. When it comes to distributions, the money an employee withdraws from their 401(k) plan upon retirement is taxed as ordinary income. However, if the 401(k) includes a Roth option, qualified distributions from the Roth account are tax-free, as contributions to a Roth 401(k) are made with after-tax dollars. The specific rules and regulations of 401(k) plans are primarily governed by federal law under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, rather than Missouri state law.