Salary-Reduction Contribution

Salary-Reduction Contribution

A cash- or deferred-contribution arrangement of an employer-sponsored retirement plan, under which participants can choose to set aside part of their pre-tax compensation as a contribution to the plan.

Notes:

This kind of contribution is also called an elective-deferral contribution. Employees defer the tax on the money until it is distributed to them.

See also: Active-Participant Status, Defined-Contribution Plan, Elective-Deferral Contribution, Employee Contribution Plan, Matching Contribution, Nonelective Contribution, Pension Plan, Simplified Employee Pension, Simple