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Categories: General Tax Terms

Qualified Retirement Plan

A Qualified Retirement Plan is a tax-advantaged retirement savings plan that meets specific requirements outlined by the Internal Revenue Code (IRC). These plans allow employees to save for retirement while enjoying tax benefits, such as tax-deferred growth on contributions and potential employer matching contributions.

To be considered "qualified," these plans must adhere to certain standards, including:

  1. Contribution Limits: They must follow IRS contribution limits and rules.

  2. Non-Discrimination: Plans must provide benefits to a broad range of employees and not just a select group of highly compensated employees.

  3. Vesting: They must have a vesting schedule that dictates when employees gain ownership of employer contributions.

  4. Distribution Rules: They must follow specific rules regarding withdrawals and distributions.

Examples of qualified retirement plans include 401(k) plans, 403(b) plans, and pension plans. These plans typically provide tax deductions for contributions made by both the employee and employer, and funds grow tax-deferred until they are withdrawn, usually in retirement.

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