What is a primary feature of a 401(k) retirement plan?

A primary feature of a 401(k) retirement plan is that it allows employees to contribute a portion of their pre-tax salary into investment accounts. This mechanism not only helps workers save for retirement but also reduces their taxable income in the year contributions are made. The funds in the account can grow tax-deferred, meaning that taxes on investment earnings are postponed until withdrawal, typically at retirement.

This feature is significant because it incentivizes individuals to save more for their future, as they can contribute a certain percentage of their salary, often with the added benefit of employer matching contributions. This collaborative effort between employee and employer helps to enhance retirement savings, making 401(k) plans a popular choice for retirement planning.

The other options do not capture the essence of how 401(k) plans function. For example, while taxable contributions may apply in certain contexts, they do not represent the typical operation of 401(k) plans. Additionally, guaranteed benefits paid by the employer are more characteristic of pension plans rather than a 401(k). Lastly, contributions made solely by the employer describe a completely different arrangement, as 401(k) plans typically emphasize employee contributions with the possibility of matching from the employer.