What is the primary function of a 401(k) plan?

The primary function of a 401(k) plan is to promote retirement savings through employee contributions. This type of plan is a defined contribution retirement account that allows employees to save for retirement on a tax-deferred basis. Contributions made by employees can significantly reduce their taxable income for the year, and many employers may also offer matching contributions to encourage saving.

The design of a 401(k) plan facilitates long-term appreciated growth of the employee's investments, with the understanding that the funds will be utilized during retirement. This structure is specifically aimed at helping employees build a financial foundation for their retirement years, making it a crucial tool for retirement planning in the United States.

In comparing it to the other options, the health benefits and life insurance coverage do not relate to the primary purpose of a 401(k) plan, which is focused solely on saving for retirement, while managing state pensions is outside the scope of what a 401(k) is designed to achieve.