• A 401(k) plan is the most common type of defined contribution plan in which employees choose to set aside a portion of their compensation. Under a typical 401(k), employees contribute between 1 and 15 percent of their annual pre-tax salary to the plan each year. In addition to this amount, many employers pay an employee contribution, such as 50 to 6 percent of the employee contribution. For example, if an employee contributes 6 percent of their salary to a 401(k) plan, the employer will contribute an additional 3 percent so that the employee saves a total of 9 percent of their annual salary (i.e., 6 percent contribution plus 3 percent employer contribution). There are annual maximum amounts that employees can contribute, as well as distribution limits under the age of 59.5.