Which type of pension plan involves funding from both the employer and the employee?

A contributory pension plan is one in which both the employer and the employee contribute to fund the retirement benefits. This type of plan encourages employees to save for their retirement while also allowing employers to support their employees’ retirement savings. Contributions may be made through payroll deductions, and often, these plans provide some incentive for the employer to match a certain percentage of the employee's contributions, enhancing the overall retirement benefit.

In contrast, a defined benefit plan typically provides a predetermined payout at retirement, but it is usually funded solely by the employer. Noncontributory pension plans do not require employee contributions—only the employer contributes to the plan. Cash balance pension plans, while they may seem similar to contributory plans, are actually a type of defined benefit plan that guarantees a certain return on contributions but does not involve direct contributions from employees in the form of a payroll deduction.

The contributory nature of the selected answer allows employees to have a stake in the plan, making it beneficial for their long-term financial security.