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Chapter 1. What Is a 401(k)? > What Kinds of Protective Shell Retirement Plans ... - Pg. 8

What Is a 401(k)? 8 Technically speaking, pension plans and 401(k) plans are governed by different laws. A pension plan is a defined-benefit plan, and a 401(k) is a defined-contribution plan. Most employers don't require you to contribute to a pension plan (unless you work for a government entity, that is). Just about all defined-contribution plans allow you to contribute and make investment decisions. Both are protective shells. For What It's Worth Thanks to EGTRRA, signed into law on June 7, 2001, next year will be a landmark year for 401(k), 403(b), and 457 plans. You'll be able to contribute more, save more on taxes, and transfer funds between these plans and IRAs with few restrictions. So, read on, 'cause we're going to give you the inside scoop on how to get the most out of these tax law changes and this book. What Kinds of Protective Shell Retirement Plans Are There? We can answer this question best with the following table. Read it carefully. Table 1-1. What Type of Retirement Plan Do You Have? Retirement Plan Options