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welcome to county office your ultimate guide to local government services and public records let's get started what is an elective deferral to a 401k an elective deferral to a 401k is a contribution that an employee chooses to make from their salary to their employer sponsored retirement plan this type of contribution is also known as a salary deferral or salary reduction contribution how it works when an employee decides to make an elective deferral they authorize a specific amount to be deducted from their paycheck before taxes are applied this deduction is then transferred directly into their 401k account for example if an employee earns $40,000 a year and decides to defer $1,200 annually their taxable income would be reduced to $38,600 for that year tax benefits these contributions are typically made on a pre-tax basis meaning the money is taken out of the employees salary before federal income taxes are applied this reduces the employees taxable income for the year resulti

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