Final answer:
State and local government employees often participate in a 457 plan, which is specifically designed for them and allows tax-deferred savings for retirement.
Step-by-step explanation:
State and local government employees would typically participate in a 457 deferred compensation plan. Unlike the 401(k) which is more common in the private sector, or the 403(b) plans used by employees of non-profit organizations and educational institutions, the 457 plan is designed both for state and local public employees as well as certain non-profit employees. It allows these workers to save for retirement by deferring income tax on the money saved until it is withdrawn during retirement. These tax-deferred plans are a valuable benefit for public sector employees, offering portability and potential protection against inflation.