Payroll Deduction Plan

AAA

DEFINITION of 'Payroll Deduction Plan'

A contribution plan in which an employer deducts a specified amount from an employee's pay and puts the funds toward insurance, healthcare or an investment account. In most situations, employees enter into payroll deduction plans on a voluntary basis.

INVESTOPEDIA EXPLAINS 'Payroll Deduction Plan'

Payroll deduction plans offer employees a convenient way to automatically contribute income toward an ongoing expense or investment. For example, it is common for employees to deduct a set percentage of income and contribute it to their Traditional or Roth IRAs. An employee may also choose to have the premiums from an insurance policy deducted from their pay, ensuring that a payment is never missed.

RELATED TERMS
  1. Roth IRA

    An individual retirement plan that bears many similarities to ...
  2. Health Savings Account - HSA

    An account created for individuals who are covered under high-deductible ...
  3. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  5. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
  6. Value Of Risk (VOR)

    The financial benefit that a risk-taking activity will bring ...
RELATED FAQS
  1. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  2. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  4. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>
  5. Will a hike in the minimum wage result in deadweight loss to businesses and labor?

    There have been studies which show that hikes in minimum wage create deadweight loss to business and labor. It is possible ... Read Full Answer >>
  6. How do companies identify and manage business risk?

    In each stage of the business life cycle, companies face both internal and external risks that can have detrimental effects ... Read Full Answer >>
Related Articles
  1. Retirement

    Payroll Deductions Pay Off

    Find out how you can bypass or defer taxes on thousands of dollars each year.
  2. Options & Futures

    Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?
  3. Taxes

    Small Business Tax Obligations: Payroll Taxes

    Don't leave it up to your accountant - owners are ultimately responsible for fulfilling tax obligations.
  4. Retirement

    Traditional IRAs Tutorial

    This comprehensive guide goes through what a Traditional IRA is and how to set one up, contribute to it and withdraw from it.
  5. Options & Futures

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  6. Retirement

    SEP IRAs Tutorial

    Learn about the set-up, the contributions to and the distributions from this IRA-based plan to which employers may make tax-deductible contributions on behalf of eligible employees.
  7. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  8. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  9. Personal Finance

    Protect Your Teen When They Work Over The Summer

    If your child is working a summer job, here are some rules you should know about what he or she is allowed to do.
  10. Retirement

    Why Working Longer To Save More Is A Bad Strategy

    If your retirement plan mostly consists of working longer to earn and save more money, you might need to rethink that strategy.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center