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 North Carolina, as in other states, a 401(k) plan is a retirement savings plan sponsored by an employer that allows employees to save and invest a portion of their paycheck before taxes are taken out. The contributions made by employees towards a 401(k) are not taxed until the employee withdraws that money, typically after retirement. Employers may also contribute to the plan by matching a certain percentage of the employee's contributions or by adding funds through non-elective contributions. The state of North Carolina follows the federal guidelines for 401(k) plans, which are primarily governed by the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. Distributions from a traditional 401(k) plan are taxed as ordinary income when the employee retires, while qualified distributions from a Roth 401(k) are generally tax-free. It's important to note that specific rules regarding contributions, distributions, and taxation can be complex, and individuals may benefit from consulting with an attorney or a tax advisor to understand the implications for their personal situation.