A qualified retirement plan is one that is allowed certain tax advantages because it meets criteria spelled out in the Internal Revenue Code and in the Employee Retirement Income Security Act.
A qualified plan lets employers take tax deductions for any contributions they make to an employee’s account. Employee contributions are tax deferred, as is any investment growth, until money is withdrawn. Contribution limits apply to all plans, as do penalties for early withdrawal.
Some of the most common qualified retirement plans include 401(k), profit sharing and 403(b) plans. Some must be set up by employers. Others, such as a traditional individual retirement account or Roth IRA, can be established by individuals.