What describes a basic provision of an IRC Section 401(k) plan regarding employer deductions?

The correct choice highlights a fundamental aspect of IRC Section 401(k) plans regarding how much an employer can deduct for contributions made to these retirement plans. Specifically, it states that an employer’s deduction for a vested contribution is limited to a maximum of 25% of total compensation paid to all eligible participants during the year. This provision ensures that the tax benefits for the employer do not exceed a reasonable proportion relative to the employees' overall compensation, maintaining compliance with IRS regulations.

In relation to the other choices, the limit on employee elective deferrals is inaccurate as it is far outdated, and the correct limit has significantly increased over the years. Additionally, the percentage deduction of 20% mentioned is not applicable under current IRS guidelines for employer contributions to 401(k) plans. Lastly, while employee contributions do not incur FICA taxes until they are withdrawn, the essence of the question is specifically targeting employer deductions and their limitations, making the first option the only appropriate choice regarding this specific aspect of retirement plan provisions.