Qualified retirement plan,
Definition of Qualified retirement plan:
A qualified retirement plan meets the requirements of Internal Revenue Code Section 401(a) of the Internal Revenue Service (IRS) and is thus eligible to receive certain tax benefits, unlike a non-qualified plan. An employer establishes such a retirement plan on behalf of and for the benefit of the company’s employees. It is one tool that can help employers attract and retain good employees.
Qualified plans come in two main types: defined benefit and defined contribution, though there are also some other plans that are hybrids of the two, the most common of which is called a cash balance plan. Defined benefit plans give employees a guaranteed payout and place the risk on the employer to save and invest properly to meet plan liabilities. A traditional annuity-type pension is an example of a defined-benefit plan.
A plan established by employers under the requirements set forth in Section 401(a) and 403(a) of the Internal Revenue Code for the benefit of their employees who want to save for retirement. Plans that meet the requirements receive favorable tax treatment on behalf of the employer and the plan participants, such as the tax deductibility of contributions and tax deferral on earnings in the plan.
How to use Qualified retirement plan in a sentence?
- Employers offer retirement plans to attract and retain employees.
- Examples of qualified retirement plans include 401(k), 403(b), and profit-share plans.
- Stocks, mutual funds, real estate, and money market funds are the types of investments sometimes held in qualified retirement plans.
- A qualified retirement plan meets IRS requirements and offers certain tax benefits.
- Taking contributions out of a retirement plan before retirement age can often result in tax penalties.
Meaning of Qualified retirement plan & Qualified retirement plan Definition