Thrift Plan

Thrift plan

A defined contribution plan in which an employee contributes, usually on a before-tax basis, toward the ultimate benefits that will be provided. The employer usually agrees to match all or a portion of the employee's contributions.

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Thrift Plan

A retirement account in which a worker and an employer each make contributions up to a certain limit throughout the working life of the employee, usually on a before-tax basis. Under a thrift plan, a worker places a portion of his/her pre-tax income into an account and allows it to be invested. Taxation is deferred until withdrawal from the account, generally after retirement. It is important to note, however, that unlike some retirement plans, the employer makes a defined contribution to the account as well. Thrift plans are employee benefits, and workers must have a sponsoring employer to take advantage of one. See also: 401(k).