EMPLOYEE CONTRIBUTION PLAN

Employer-sponsored retirement plan in which employees deposit or contribute part of their paycheck into a retirement account owned by employees and held in the employee’s name. Such plans are subject to annual contribution limits the federal government imposed, but frequently have tax benefits including deferred taxes on investment gains and capacity to contribute gross income. Employees always possess 100% of the contributions they paid. Some firms match employee contributions up to a defined limit, but employee may not have the whole matching contribution until it fully vests after many years of continued employment.

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