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 New York, 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 Taxes aren't paid until the money is withdrawn from the account.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 can choose 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, or when the employee takes distributions from the plan, the funds, including any earnings, are subject to income tax, except for qualified distributions from Roth accounts which are tax-free. The specific rules and regulations governing 401(k) plans are primarily established under federal law, specifically the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. New York State does not have distinct regulations for 401(k) plans, but state tax laws generally conform to federal tax treatment for these retirement accounts.