What type of retirement plan automatically deducts money from an employee's paycheck before taxes?

The correct answer is C, the 401k plan. A 401k plan is a type of employer-sponsored retirement plan that allows employees to save for retirement while benefiting from tax advantages. Contributions to a 401k are deducted directly from an employee's paycheck before taxes are calculated, which reduces the taxable income for the year in which the contributions are made. This means employees can effectively lower their current taxable income while setting aside funds for retirement.

In contrast, a Roth IRA is funded with after-tax dollars, meaning contributions are not deducted from an employee’s paycheck before taxes. A pension plan typically promises a specific payout at retirement based on salary and years of service, rather than allowing for direct paycheck deductions. A Traditional IRA can be funded through various means, but contributions typically come from after-tax income, and any tax deductions are only applied when filing tax returns, rather than being withheld from paychecks automatically.

Therefore, the 401k plan is distinctly characterized by this automatic payroll deduction feature, making it an effective way for employees to save for their future while benefiting from immediate tax advantages.