401k — Payroll Definition
What is 401k? Clear definition and explanation for payroll professionals, HR managers, and employees.
What is 401(k) Contribution?
A 401(k) is an employer-sponsored retirement savings plan. Contributions are deducted from your paycheck BEFORE income taxes are calculated (pre-tax), which lowers your current taxable income. For 2026, the maximum employee contribution is $23,500 ($31,000 for workers 50+). Many employers offer a "match" — for example, dollar-for-dollar up to 4% — which is essentially free money. Roth 401(k) contributions are made after-tax but grow tax-free.