A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Some of the key features of 401k plans are:

• Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).

• Employers can contribute to employees’ accounts.

• Distributions—including earnings—are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).

In Indiana, as in all states, 401(k) plans are governed by federal law, specifically the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Employees in Indiana can elect to defer a portion of their salary into their 401(k) plan, which reduces their taxable income for the year, except for contributions to a Roth 401(k), which are taxed upfront but may be withdrawn tax-free in retirement. Employers have the option to make contributions to their employees' 401(k) accounts, which can be matched up to a certain percentage. Upon retirement, distributions from a traditional 401(k) are taxed as ordinary income, while qualified distributions from a Roth 401(k) are tax-free. It's important to note that while the federal government sets the primary regulations for 401(k) plans, state laws, such as creditor protection laws, can also affect these retirement accounts. However, Indiana follows the federal guidelines for 401(k) contributions and distributions without additional state-specific alterations.