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What does the letter k mean in 401k?

Updated: 9/16/2023
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14y ago

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The letter k refers to a sub-section of Section 401 of Internal Revenue Code.

In 1978, Congress amended the Internal Revenue Code by adding section 401(k), whereby employees are not taxed on income they choose to receive as deferred compensation rather than direct compensation.

The law went into effect on January 1, 1980, and by 1983 almost half of large firms were either offering a 401(k) plan or considering doing so.

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Q: What does the letter k mean in 401k?
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What does k stands for in 401k?

K usually means 1,000 so 401k would be 401,000.Generally, Americans speaking of a 401k, speak of a retirement plan.Simply it is the tax code - think of it as an outline numbering - 401 is the 401st section and "k" is the subsection number/letter. The K doesn't stand for anything that starts with the letter K or 1000 increments. It stands for the (k) section of the 401st tax code section that lets employees contribute to a retirement plan and not be taxed on what they contribute.


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401k is a section of the US Tax Code which describes a particular retirement plan. Section 401a describes a different plan. The letter is a subsection of chapter 401 of the Tax Code.


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