Which retirement plan is most commonly associated with employer matching of employee deferrals?

Which retirement plan is most commonly associated with employer matching of employee deferrals?

• A. IRA
• B. 401k
• C. Roth IRA
• D. profit sharing plans

Answer: (B)

The feature being tested is the plan that is most closely known for employer matching of what employees defer from their pay. A 401(k) plan is designed around employees contributing pre-tax or after-tax (Roth) deferrals from their salary, and many employers sweeten the deal by providing a matching contribution based on a portion of those deferrals. This match acts as an incentive to save more for retirement and effectively boosts the employee’s retirement funds beyond their own contributions, making the 401(k) the standard example of employer matching. IRAs and Roth IRAs are individual accounts funded by the employee, and they do not involve employer matching as part of their typical structure. Profit sharing plans are primarily about employer contributions tied to company profits rather than a direct match of employee deferrals, though some plans may combine elements with other plan types. So the plan most commonly associated with employer matching of employee deferrals is the 401(k).

The feature being tested is the plan that is most closely known for employer matching of what employees defer from their pay. A 401(k) plan is designed around employees contributing pre-tax or after-tax (Roth) deferrals from their salary, and many employers sweeten the deal by providing a matching contribution based on a portion of those deferrals. This match acts as an incentive to save more for retirement and effectively boosts the employee’s retirement funds beyond their own contributions, making the 401(k) the standard example of employer matching.

IRAs and Roth IRAs are individual accounts funded by the employee, and they do not involve employer matching as part of their typical structure. Profit sharing plans are primarily about employer contributions tied to company profits rather than a direct match of employee deferrals, though some plans may combine elements with other plan types. So the plan most commonly associated with employer matching of employee deferrals is the 401(k).