How Does A 401K Retirement Plan Work? 
A 401 -LRB- k -RRB- retirement plan is a defined contribution plan under ERISA , the Employee Retirement Income Security Act of 1974 . Employer sponsored 401 -LRB- k -RRB- plans enjoy tax deductible contributions up to $ 17,500 for 2013 with an additional contribution of $ 5,500 under the catch up provision for those age 50 and older . 401 -LRB- k -RRB- plans accumulate tax deferred and as taxable at ordinary income . Some employers also provide some degree of contribution match as well . 