What is a retirement plan that allows employees to contribute from their paycheck?

The most fitting choice for a retirement plan that allows employees to contribute directly from their paycheck is a 401(k) plan. This type of plan is specifically designed to facilitate employee contributions on a pre-tax basis, allowing them to invest a portion of their earnings into retirement savings. Often, employers also offer matching contributions, which can significantly enhance the employee's retirement savings over time.

A pension plan typically provides fixed payments to employees upon retirement, and it does not require contributions from employees' paychecks. Employee-sponsored retirement plans encompass a broader category, which includes various options like 401(k) plans but does not singularly emphasize paycheck contributions as a defining characteristic. An Individual Retirement Account (IRA) is primarily established by individuals rather than through employer payroll deductions, and it does not permit direct contributions from paychecks in the same way that a 401(k) does. Thus, considering the mechanisms involved, the 401(k) plan accurately represents the retirement option where employees contribute directly from their paychecks.