What is the primary purpose of an employer-sponsored retirement plan?

The primary purpose of an employer-sponsored retirement plan is to provide a savings vehicle for retirement with potential tax advantages. These plans, such as a 401(k) or a pension plan, are designed to encourage employees to save for their retirement while enjoying tax benefits. Contributions to these plans can often be made on a pre-tax basis, meaning the money is deducted from an employee's paycheck before taxes are applied, which reduces their taxable income for the year. Additionally, the earnings on investments within the plan grow tax-deferred until withdrawal, allowing for potentially greater accumulation of savings over time.

This focus on retirement savings is crucial because it helps employees plan for their financial future, providing them with a more secure retirement. The other options do not encompass the primary goal of these plans; limiting contributions does not promote saving, ensuring employees do not spend their salary overlooks financial needs, and increasing company earnings is not a direct benefit to employees but rather to the business itself. Therefore, the correct answer captures the essential role of employer-sponsored retirement plans in fostering long-term savings for employees.