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The term 401(k) comes from a section of the Internal Revenue Code that allows special tax considerations to help people save for retirement. Most importantly, a 401(k) Plan is a vehicle in which money contributed is invested in mutual funds or other investment options. Growth of the investments generate greater interest earnings than a traditional savings account AND the growth is TAX-DEFERRED! Put simply, with a 401(k) Plan, your money earns interest, the interest earns interest and taxes are deferred on the amount saved and on the amount the employer withholds until the individual starts receiving benefits. Plus, as an added incentive, the percentage taxable is traditionally lower at retirement age, therefore, you pay less taxes! These two combinations create a dynamic savings plan. Additionally, when individuals participate in a 401(k) plan, they have available at their fingertips all the knowledge and expertise of veteran money managers and analysts to which they would not normally have access. A 401(k) plan may be utilized in addition to other retirement plans such as a Profit-Sharing Plan, an IRA, or may be a stand-alone plan. Defined Contribution Plans - The maximum annual addition limit increase to the lesser of 100% of compensation, or $40,000.  This change is effective for limitation years beginning after 2001 and indexed for cost-of-living changes thereafter. PAI - Pension Services, Inc. offers plans which provide a vast variety of investment choices and the assistance to aid employees to make educated investment decisions. BACK TO INDEX