Final answer:
A 401(k) is an employer-sponsored retirement plan allowing for pretax contributions by employees. It is a 'defined contribution' plan, distinct from Roth IRAs and HSAs, offering tax-deferred investments and portability between different employers.
Step-by-step explanation:
An IRS-approved retirement plan sponsored by an employer to which employees may make pretax contributions is a 401(k) plan. A Roth IRA differs in that contributions are made with after-tax dollars, while a Health Savings Account (HSA) is intended for healthcare expenses, not retirement. A 403(b) plan is also an employer-sponsored plan, available to certain employees of public schools and tax-exempt organizations.
Defined contribution plans like 401(k)s and 403(b)s allow the employer to contribute a fixed amount to the employee's retirement account. These contributions are typically made every paycheck and the employee may also contribute. These funds can be invested in a variety of investment vehicles, and the plans are tax-deferred, meaning that taxes are not paid on the money until it is withdrawn during retirement, and they're portable, so employees can take their 401(k) with them if they change employers. This type of plan can be beneficial in overcoming the inflation costs that can affect traditional pensions.
While traditional IRAs also offer tax-advantaged savings, the main difference between IRAs and 401(k)s is that IRAs are usually established individually, outside of an employer-sponsored environment.