Even in the harsh economic environment of the past couple of years, retirement saving through employer-sponsored 401 plans has continued to thrive and grow.

More than nine of out 10 companies now offers these programs, and more than half to three-quarters of eligible workers take part, according to newly issued studies by two prominent consulting firms."Participation rates should be higher still," said Lou Valentino, consultant at the Wyatt Co. in Washington. "Tax advantages make the 401 an excellent retirement savings vehicle under almost any circumstances."

Like individual retirement accounts and Keogh plans, two other modern retirement savings vehicles, 401 allow savers to deduct annual contributions from current income taxes, and to earn dividends, interest or capital gains free from taxation until they start withdrawing money from their accounts.

A similar deal, known as a 403 plan, can be offered by public institutions such as colleges and universities for their employees. Both programs are named after the sections of the tax laws that govern them.

These plans are part of a fundamental trend in the nation's retirement saving system away from old-style pensions that pay a "defined benefit," toward "defined contribution" plans in which the individual worker has more say and takes more responsibility.

"There are lots of reasons to take part in your company-sponsored 401 plan," says the accounting firm of Price Waterhouse in its annual Retirement Planning Adviser.

"One is to slash your current tax bill. Another is the opportunity to build retirement savings on a tax-deferred basis. Still another is to boost the amount of money you collect from your employer."

The last-named of those attractions occurs only in plans where employers make matching contributions, usually figured as a percentage of what the employee pays in.

"Companies that match employee contributions to 401 plans increase participation by a considerable margin," Wyatt Co. reports.

"When no match is offered, the average employee participation rate is 51 percent. That number climbs to 66 percent when up to one-quarter of the employee pretax contribution is matched, and to 74 percent when 100 percent or more is matched."

These numbers make a lot of sense, since the attraction of a matching contribution gets more and more compelling as its size increases.

"For most people," says Price Waterhouse, "a key reason for participating is to collect the additional amounts from your company.

"After all, if your employer kicks in 50 cents for every dollar you contribute, you're immediately getting a 50 percent return on your investment."

As 401 grow and mature, sponsoring employees have tended to offer participants more investment choices. In the early days particularly, a typical setup might have allowed savers a simple choice of, say, shares of the employer's stock or an interest-bearing investment contract from an insurance company.

Common additions since then have been mutual funds investing in stocks, bonds and money markets.

"Almost half (48 percent) of the responding companies offer four or five investment options, with another 15 percent offering six to 10 investment choices," says Buck Consultants of New York, a firm which has just completed an annual survey of 401 sponsors.