It is called a 401(k) because the rule sits in subsection (k) of section 401 of the Internal Revenue Code, which the Revenue Act of 1978 added. The k does not stand for any word. It is that subsection’s letter, and 401 is the section number.
What does the k stand for in 401(k)?
The k stands for nothing: it is the label of subsection (k) of 26 U.S.C. 401, and that subsection’s heading reads “Cash or deferred arrangements.” Section 135(a) of the Revenue Act of 1978 (Pub. L. 95-600, November 6, 1978) inserted it as a “new subsection,” with no plan name attached.
The law’s own term is “qualified cash or deferred arrangement,” defined at section 401(k)(2): an arrangement under which a covered employee may elect to have the employer pay money into a trust under the plan or pay it to the employee in cash. The phrase “401(k) plan” does not appear in the operative text of section 401. As a plan name, the nickname reaches that text only in paragraph (16), “Starter 401(k) deferral-only plans,” added by section 121(a) of Pub. L. 117-328 in December 2022.
Talk With Craig Wear's Team
Craig has helped IRA millionaires save over $1 million each in unnecessary taxes. Find out if a Roth conversion strategy fits your retirement, with no sales pressure and no product pitch.
The 1978 amendment first applied to plan years beginning after December 31, 1979, under section 135(c)(1). The account of who turned that clause into paycheck savings belongs to the history of when the 401(k) was introduced.
Why did the letter happen to be k and not another letter?
Because k was the slot Congress opened in 1978: section 135(a) redesignated the existing subsection (k) as (l) and inserted the new text “after subsection (j).” The topic had no bearing on the letter, since four earlier laws had already filled (c) through (j), each one pushing the section’s closing subsection further down the alphabet.
| Year | Law | Letters added to section 401 | Closing subsection moves to |
|---|---|---|---|
| 1954 | Internal Revenue Code of 1954, 68A Stat. 134 | Section ends at (c) | (c) |
| 1962 | Pub. L. 87-792 sec. 2(3) | (c) through (g), for the self-employed | (h) |
| 1962 | Pub. L. 87-863 | (h), retiree medical benefits | (i) |
| 1964 | Pub. L. 88-272 | (i), union-negotiated pension plans | (j) |
| 1974 | Pub. L. 93-406 (ERISA) sec. 2001(d)(2) | (j), defined benefit rules for the self-employed | (k) |
| 1978 | Pub. L. 95-600 sec. 135(a) | (k), cash or deferred arrangements | (l) |
| 1982 | Pub. L. 97-248 sec. 249(a) | (l) | (o) |
| 1986 | Pub. L. 99-514 secs. 1117(a), 1898(c)(3) | (m) match testing and (n) domestic relations orders | (n), then back to (o) |
| 2019 | Pub. L. 116-94 sec. 205(a) | (o) | (p) |
Q3 tabulation of the amendment notes to 26 U.S.C. 401 at Cornell’s Legal Information Institute, checked against the Statutes at Large text of Pub. L. 87-792 and Pub. L. 95-600.
The table holds the only real link between Keogh and the letter k. Pub. L. 87-792 of 1962 (H.R. 10, the Self-Employed Individuals Tax Retirement Act) added five subsections at once, (c) through (g). Remove those five and, on plain letter arithmetic, the 1978 insertion lands at (f), which would have made the same provision a 401(f).
Letters also stay put once assigned. Subsection (j) was repealed in 1982 by Pub. L. 97-248 section 238(b) and (e) in 1984 by Pub. L. 98-369 section 713(d)(3), yet the Code left both slots empty, so (k) never slid up to (j) or (i). The notes follow the subsection pushed aside in 1978 to its current spot at (p), a single sentence: “For exemption from tax of a trust qualified under this section, see section 501(a).”
What does the 401 mean, and how do you read 401(k)(2)(B)(i)(III)?
401 is a section number, not a quantity: section 401 of Title 26 of the U.S. Code, headed “Qualified pension, profit-sharing, and stock bonus plans,” opens Subchapter D and has carried that number since the Internal Revenue Code of 1954. Each bracket after the number drops one level in the statute’s outline.
The age 59½ rule shows the whole ladder. Its full address is 26 U.S.C. 401(k)(2)(B)(i)(III), which reads left to right like this:
- Section 401: qualified plans generally.
- Subsection (k): cash or deferred arrangements.
- Paragraph (2): what makes the arrangement qualified.
- Subparagraph (B): limits on amounts attributable to the employee’s election.
- Clause (i): those amounts may not be distributable earlier than listed events.
- Subclause (III): “in the case of a profit-sharing or stock bonus plan, the attainment of age 59½.”
Those level names are the Code’s own vocabulary. The amendment notes to section 401 say “added subsec.,” “added par.,” “added subpar.” and “added cl.,” and the 1978 Act says “subsection” for (k), so calling it “paragraph (k)” is one level off. Two look-alikes also trip readers: ERISA section 401 is 29 U.S.C. 1101, a coverage rule in a separate statute, and the 10% additional tax on early distributions is at 26 U.S.C. 72(t), not in section 401 at all.
What is in every lettered subsection of section 401?
Section 401 runs from (a) to (p): 16 letters, 14 live and 2 repealed. Only (k) creates elective salary deferrals, while (a) sets the qualification rules the whole plan has to pass and (m) tests the employer match. The table lists each heading as printed in the Code, with what it changes for someone saving in a 401(k).
| Letter | Heading in the Code | What it does for a 401(k) saver |
|---|---|---|
| (a) | Requirements for qualification | Holds required distributions at (a)(9), the pay cap at (a)(17), deferral limits at (a)(30), direct rollovers at (a)(31) |
| (b) | Certain plan amendments | Gives the sponsor time to repair plan documents; opens no account |
| (c) | Definitions and rules relating to self-employed individuals and owner-employees | (c)(1) treats a self-employed person as an employee, the footing for an owner-only plan |
| (d) | Contribution limit on owner-employees | Ties an owner-employee’s contributions to earned income from the business running the plan |
| (e) | Repealed in 1984 | Formerly contributions for premiums on annuity contracts; no effect today |
| (f) | Certain custodial accounts and contracts | Treats a custodial account or insurance contract as a qualified trust |
| (g) | Annuity defined | Sets what counts as an annuity for sections 401 to 404; excludes most transferable contracts issued after 1962 |
| (h) | Medical, etc., benefits for retired employees and their spouses and dependents | Applies to pension or annuity plans, not to salary deferrals |
| (i) | Certain union-negotiated pension plans | Protects the past tax status of a union pension trust; no effect on deferrals |
| (j) | Repealed in 1982 | Formerly defined benefit rules for plans covering the self-employed; no effect today |
| (k) | Cash or deferred arrangements | The source of the name: the election, the withdrawal limits, immediate vesting of deferrals, the (k)(3) deferral test, plus SIMPLE (k)(11), safe harbor (k)(12), automatic (k)(13) and starter (k)(16) designs |
| (l) | Permitted disparity in plan contributions or benefits | Lets employer contributions tilt above an integration level capped at the Social Security wage base, $184,500 for 2026 |
| (m) | Nondiscrimination test for matching contributions and employee contributions | Tests the match by pay group; (m)(13) covers matches on qualified student loan payments |
| (n) | Coordination with qualified domestic relations orders | Rules for dividing an account under a court order, as in a divorce |
| (o) | Special rules for applying nondiscrimination rules to protect older, longer service and grandfathered participants | Testing relief for closed groups of older participants, added in 2019 |
| (p) | Cross reference | Points to section 501(a) for the trust’s tax exemption |
Q3 reference table built from reading the text of 26 U.S.C. 401 and its amendment notes. Headings are quoted from the Code; the right column is Q3’s plain-language summary.
The name singles out one of 14 live subsections, yet the rules savers meet at retirement sit elsewhere: required distributions at (a)(9) begin at age 73 for people born 1951 to 1959 and 75 for those born 1960 or later. Inside (k), paragraph (5) borrows section 414(q) for “highly compensated employee,” which is the $160,000 threshold for 2026. Subsection (b) is the letter that gets confused with 403(b), a mix-up unpacked in 401b vs 401k.
Does the k stand for Keogh, thousand, or anything else?
No. Keogh plans rest on subsections (c) and (d), added in 1962, and the word Keogh does not appear anywhere in Cornell’s copy of section 401, notes included. The k does not mean thousand either: it labels a subsection and has no connection to a dollar amount, and the 2026 deferral limit is $24,500.
Keogh. Keogh plans, also called HR-10 plans, come from the 1962 law in the table above, 16 years before subsection (k). Subsection (k) arrived through a different law on a different subject: an employee’s choice between cash and a plan contribution. How those self-employed plans work today is covered under what a Keogh plan is.
Thousand. 401(k) is not shorthand for $401,000 or for thousands of anything. A lowercase letter in parentheses is how the Code marks a subsection, the same form used in 401(a), 403(b) and 501(c)(3).
An initial for some word. The heading “Cash or deferred arrangements” contains no word starting with k, and the 1978 Act’s section title, “Certain cash or deferred arrangements,” contains none either.
A special retirement letter. Another retirement plan shares it. Section 408(k), “Simplified employee pension defined,” is the SEP IRA, added by section 152(a) of the same 1978 Act. In both sections k is simply the 11th position.
Is a 401(k) legally a plan at all?
Not by itself. Section 401(k)(1) describes an arrangement that a profit-sharing or stock bonus plan, a pre-ERISA money purchase plan, or a rural cooperative plan may include, and Treas. Reg. 1.401(k)-1(a)(1) says any other plan that includes one fails section 401(a). The IRS calls it “a feature of a qualified profit-sharing plan.”
Federal filings show the same structure. The 2024 Form 5500 instructions list code 2J as “Code section 401(k) feature,” separate from code 2E, “Profit-sharing plan.” Counting the plans that use 2J gives this:
| Plan-year 2024 filings coded 2J | Filings | Share |
|---|---|---|
| All, after exclusions below | 784,459 | 100% |
| Also coded 2E, profit-sharing | 764,643 | 97.5% |
| Coded neither 2E nor 2I (stock bonus) | 19,752 | 2.5% |
| Plan’s own name contains 401(k) or 401K | 668,209 | 85.2% |
| Plan’s own name does not | 116,250 | 14.8% |
Q3 tabulation of DOL Form 5500 and 5500-SF datasets, plan year 2024 (EFAST2 “latest” files). One filing per sponsor EIN, plan number and plan-year start; direct filing entities and 1,929 filings also coded 403(b) excluded.
So roughly 1 in 7 plans carrying the 401(k) code has a formal name without the term. Among those 116,250 names, the most common words are “retirement” (47,778), “profit sharing” (24,157) and “savings” (18,841), and a name can use more than one. A benefits portal showing “Retirement Savings Plan” can therefore still be a 401(k). The summary plan description or the plan characteristics codes on the plan’s Form 5500 (line 8a) or Form 5500-SF settle it. The profit-sharing layer underneath is explained under how a profit-sharing plan works.
Why are 403(b) and 457(b) named the same way?
They follow the same convention: each nickname is a Code address. 403(b) is subsection (b) of section 403, added in 1958 by Pub. L. 85-866 section 23(a), and 457(b) is subsection (b) of section 457, a section created by section 131 of the same 1978 Act that produced 401(k).
| Name people use | Code address | Heading in the Code | Law that added it |
|---|---|---|---|
| 401(k) | 401(k) | Cash or deferred arrangements | Pub. L. 95-600 sec. 135 (1978) |
| 403(b) | 403(b) | Taxability of beneficiary under annuity purchased by section 501(c)(3) organization or public school | Pub. L. 85-866 sec. 23(a) (1958) |
| 457(b) | 457(b) | Eligible deferred compensation plan defined | Pub. L. 95-600 sec. 131 (1978) |
| Traditional IRA | 408(a) | Individual retirement account | Pub. L. 93-406 sec. 2002(b) (1974) |
| SEP IRA | 408(k) | Simplified employee pension defined | Pub. L. 95-600 sec. 152(a) (1978) |
| SIMPLE IRA | 408(p) | Simple retirement accounts | Pub. L. 104-188 sec. 1421(a) (1996) |
| Roth IRA | 408A | Roth IRAs | Pub. L. 105-34 sec. 302(a) (1997) |
| Roth 401(k) | 402A | Optional treatment of elective deferrals as Roth contributions | Pub. L. 107-16 sec. 617(a) (2001) |
| Thrift Savings Plan | 7701(j) | Tax treatment of Federal Thrift Savings Fund | Pub. L. 99-514 sec. 1147(a) (1986) |
Q3 reference table from the section text and source credits at Cornell’s Legal Information Institute. The Thrift Savings Plan row shows the tax rule only; the plan itself is established outside Title 26.
The 1978 Act alone accounts for three rows, in sections 131, 135 and 152 of one law. The rows split into two groups: the IRA names come from terms the Code defines, such as “simplified employee pension” and “Roth IRA,” while 401(k), 403(b) and 457(b) are citations that became nicknames. The “Roth 401(k)” is a double nickname whose tax rules sit in section 402A rather than section 401. The origin of the word Roth is traced in when the Roth IRA started. Sponsor and limit differences belong to 403(b) vs 401(k) and 457 vs 401(k).
Where do the 2026 limits live, if not in section 401(k)?
Mostly in other sections. The $24,500 deferral limit for 2026 traces to section 402(g), catch-ups to section 414(v), and the $72,000 annual additions ceiling to section 415(c). The statutes print base figures of $15,000 and $40,000, and IRS Notice 2025-67 supplies the indexed 2026 amounts.
A worked example shows how far the label reaches. Take a hypothetical 61-year-old earning $90,000 with a plan that contributes 4% of pay. The base deferral is $24,500 under section 402(g), and the age 60 to 63 catch-up adds $11,250 under section 414(v)(2)(E), for $35,750 from the worker’s own pay, or 39.7% of it. The employer adds $3,600, bringing the total to $39,350. Against the $72,000 ceiling only $28,100 counts ($24,500 plus $3,600), leaving $43,900 unused, because section 414(v)(3)(A) keeps catch-ups outside section 415(c). Q3 calculation using 2026 IRS figures; hypothetical household.
In that example section 401(k) itself supplies the election and the distribution limits, and none of the three dollar figures. With prior-year wages under the $150,000 threshold in Notice 2025-67, section 414(v)(7) does not force the catch-up into Roth form. A later Roth conversion of the pre-tax balance would likewise run on other letters, section 408A(d)(3) and section 408A(e), with the converted amount taxed as income in that year. The mechanics are set out in what a Roth conversion is.
Frequently asked questions
Is it spelled 401k, 401K or 401(k)?
The statute and the IRS write 401(k), with a lowercase k in parentheses, because the parentheses mark a subsection. The other spellings mean the same thing. Of the 668,209 plan-year 2024 filings coded 2J with the label in the plan’s name, 85,538 wrote it without parentheses, as in “401K Plan,” per the Q3 tabulation of DOL Form 5500 data.
Who came up with the name 401(k)?
No statute or agency chose it as a brand. Section 135 of the Revenue Act of 1978 uses only “qualified cash or deferred arrangement,” and the citation to subsection (k) became the everyday name. Treasury’s own rules at Treas. Reg. 1.401(k)-1 still carry the formal heading “Certain cash or deferred arrangements” rather than a plan name.
Was the 401(k) created in 1978 or 1981?
Congress created subsection (k) in 1978, effective for plan years beginning after December 31, 1979. The 1981 date refers to Treasury’s proposed regulations of November 10, 1981, at 46 Fed. Reg. 55544, which the notice said would give the public “the guidance needed to comply with the Act.” A glossary dating creation to 1981 is mixing up those two events.
Is a solo 401(k) in the tax code?
Not under that name: the word “solo” appears nowhere in section 401. A solo 401(k) is an ordinary cash or deferred arrangement whose only participants are a business owner and, in many cases, a spouse. Section 401(c)(1) lets the self-employed owner count as an employee, and the same $24,500 deferral limit for 2026 applies.
Can a state or city government offer a 401(k)?
Generally no. Section 401(k)(4)(B)(ii), headed “Governments ineligible,” bars a qualified cash or deferred arrangement in a plan maintained by a state or local government or its agencies, and that clause carves out only rural cooperative plans and Indian tribal government employers. Other public employers use other addresses: 457(b) for state and local governments and 403(b) for public schools.
Methodology: This page compiles primary documents and public data: the text and amendment notes of 26 U.S.C. 401, 402, 402A, 403, 408, 408A, 414, 415, 457 and 7701 at Cornell’s Legal Information Institute, the Statutes at Large pages for Pub. L. 87-792 and Pub. L. 95-600, Treas. Reg. 1.401(k)-1, the 1981 Federal Register, IRS Notice 2025-67 and the 2024 Form 5500 instructions. A script computed the Form 5500 tabulation from the DOL datasets; the statute tables were built by reading the sections directly. The 1954 row relies on the amendment notes rather than a separate reading of the 1954 Code. Anonymous forum anecdotes were excluded because this is a financial topic where accuracy affects decisions.
This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult a qualified professional about your specific situation.
