The 401k plan was established to encourage individuals to save for their future retirement needs.  A 401k plan is established by an employer to assist their employees to save for retirement.  Individuals who are eligible to save through a 401k plan can save money on a pre-tax basis, lowering their annual taxable earnings, and in some cases with qualified plans, can contribute additional funds on an after-tax basis. 401k plans also benefit the employer, as contributions made on behalf of the employees into these accounts may be tax-deductible for the business.