A 401(k) is an employer sponsored retirement plan named after a section in the Internal Revenue Service code. An employee can elect to have a certain portion of their wages put into a tax deferred investment account provided by their employer. Typically the employee can choose from a number of investment options, often including mutual fund, bond, or money market investments. Some companies even offer the option to purchase company stock. All 401(k) contributions made by an employee are on a pre-tax basis meaning that no income tax is paid on contributions until the money is withdrawn.