An employer 401(k) plan is an employer-sponsored retirement savings plan that gives employees a choice of investment options—typically mutual funds. Employees who participate in a traditional 401(k) plan have a portion of their pre-tax salary invested directly in the option or options they choose. These contributions and any earnings from the 401(k) investments are not taxed until they are withdrawn.

In Rhode Island, as in other states, an employer 401(k) plan is a retirement savings program that is sponsored by an employer and allows employees to save and invest for their own retirement on a tax-deferred basis. Employees can choose to contribute a portion of their pre-tax salary to their 401(k) plan, which can then be invested in a variety of investment options, typically mutual funds. The contributions made by employees, as well as any earnings or gains from the investments, are not subject to federal or state income tax until the employee withdraws the money, typically after reaching retirement age. Federal law, specifically the Employee Retirement Income Security Act (ERISA), sets minimum standards for most voluntarily established retirement and health plans in private industry, including 401(k) plans, to provide protection for individuals in these plans. Additionally, the Internal Revenue Service (IRS) establishes contribution limits and other regulations for 401(k) plans. Rhode Island state law does not specifically regulate the structure of 401(k) plans, as these are primarily governed by federal law.