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 Washington state, as in the rest of the United 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 to a traditional 401(k) are typically tax-deferred, meaning they reduce the employee's taxable income. However, Roth 401(k) contributions are made with after-tax dollars, and qualified distributions from a Roth account are tax-free in retirement. Employers may also make contributions to the employees' 401(k) accounts, which can be in the form of a match or non-elective contributions. Upon retirement or when the employee becomes eligible for distributions, the money from a traditional 401(k) account, including earnings, is taxed as ordinary income. 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). Washington state law does not have unique regulations for 401(k) plans, as these plans are governed at the federal level.