Section 401(k) of the Internal Revenue Code allows employees to contribute to retirement plans. This code section has now become the de facto common name of a specific type of retirement plan.

These tax-deferred saving plans allow employees to contribute by deferring compensation; these contributions may accumulate interest until disbursements are made. The interest and often the contributions are tax-deferred. Nonprofit organizations have similar plans known as 403(b)s or TIAA-CREF plans.

Employers often make additional contributions to these retirement plans. Employer contributions often match some or all of the employee's contributions. Employer matching is usually between 25 cents and a dollar for each dollar the employee contributes to the retirement account, up to a preset limit. Because employer matching functions like an instant guaranteed return of 25 to 100 percent on your money, an eligible employee at a company that provides a retirement plan should take advantage of this benefit.

Including the employer's contribution to a 401(k) or 403(b) plan when calculating total compensation is important, since it is another amount of money you are receiving from your employer.