401k plans are defined contribution plans offered by a corporation or other entity to the business's employees. This type of plan is established to allow the employee to set aside money that is tax deferred (or before taxes are levied on it) for the employee's use during his or her retirement. In some situations, the employer will also place an additional amount into the employee's account. This is an employer match. It too is not taxed until the funds are withdrawn during retirement. Those who take a distribution of the funds from the 401k plan prior to reaching a certain specified retirement age will trigger were a penalty tax. The tax is dependent on the retirement year and other considerations and is defined under IRS law.