What is a 401(k) plan?

A 401(k) plan is indeed a retirement savings plan that is sponsored by an employer, allowing employees to contribute a portion of their paycheck before taxes are taken out. This type of plan is beneficial for employees as it not only helps them save for retirement but also reduces their current taxable income, which can lead to significant tax advantages. The funds in a 401(k) can grow tax-deferred until they are withdrawn, typically during retirement when individuals may be in a lower tax bracket. Additionally, many employers offer matching contributions, which can further enhance employees' retirement savings.

The other options present different financial instruments or accounts that do not align with the primary definition of a 401(k). A health savings account focuses on medical expenses instead of retirement. A personal savings account with tax incentives lacks the specific employer-sponsored framework of a 401(k) plan. Lastly, a government bond for retirement funding does not represent a plan that allows for structured employee contributions like a 401(k) does. This distinction makes the first choice the clear and accurate representation of a 401(k) plan.