Qualified retirement plan


Also found in: Acronyms.

Qualified retirement plan

A retirement plan established by employers for their employees that meets the requirements of Internal Revenue Code Section 401(a) or 403(a) and is eligible for special tax considerations. The plan may provide for employer contributions, as in a pension or profit-sharing plan, as well as employee contributions. Employers can deduct plan contributions made on behalf of eligible employees on the business's tax return as business expenses. Plan earnings are not taxed to the employee until withdrawn.

Qualified Plan

An annuity that one buys along with one's employer. That is, the annuitant and his/her employer both make tax-deferred contributions to the plan for a certain period, with withdrawals coming upon retirement. If the annuitant begins withdrawals before a certain age, withdrawal penalties apply. One may continue to make contributions until a certain age, usually around 65.

Qualified retirement plan.

A qualified retirement plan is an employer sponsored plan that meets the requirements established by the Internal Revenue Service (IRS) and the US Congress.

Pensions, profit-sharing plans, money purchase plans, cash balance plans, SEP-IRAs, SIMPLEs, and 401(k)s are all examples of qualified plans, though each type works a little differently.

Employers may take a tax deduction for contributions to qualified plans, and in some plans employees may make tax-deferred contributions.

Among the other requirements, a qualified plan must provide for all eligible employees equivalently. That means the plan can't treat highly paid employees more generously than it does less-well paid employees, though one group of employees, such as those within five years of the official retirement age, may receive different treatment than another group.

In contrast, a nonqualified plan may be available to some employees and not others. In some plans, nonqualified contributions are made with after-tax dollars, either by the employer or the employee, although any earnings in the plan are tax deferred.

In other plans, future benefits are promised but contributions are not actually deposited in an account established for the employee.

Mandatory federal withdrawal rules that apply to qualified plans do not apply in the same way to nonqualified plans, though nonqualified plans are subject to stringent regulation as well.

References in periodicals archive ?
As a result, many employers are considering using a matching concept, similar to the match used in their qualified retirement plan.
I also encouraged Marsha to participate in her company's qualified retirement plan by starting off with a small contribution.
As new legislation and regulatory guidance require changes to qualified retirement plans, Ascensus supports and updates PAS' core compliance content and revises all affected documents.
For example, similar to death benefits in a qualified retirement plan, the value of life insurance protection provided by a WBP trust is currently taxable to the insured individual.
Only recently have annuities inside qualified retirement plans become controversial.
An individual can direct any assets into a bypass trust except those the surviving spouse will receive under law or contract, such as a jointly owned personal residence or qualified retirement plan, IRA or life insurance benefits that name the surviving spouse as beneficiary.
Supreme Court held that not even the bankruptcy court could reach a bankrupt beneficiary's interest in a qualified retirement plan.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increased both the employer profit-sharing plan deduction limit and the individual annual addition limit, making it easier for employers and participants to maximize their qualified retirement plan benefits through a single profit-sharing plan.
For instance, a person changing to part-time work at 65 may delay receipt of Social Security benefits and withdrawals from qualified retirement plan accounts, and at the same time reallocate substantial investments into municipal bonds.
Trust units held outside a qualified retirement plan
Current tax law allows a qualified retirement plan to involuntarily distribute a departing employee's retirement balance to the employee in cash if his vested balance is $5,000 or less.
A rollover IRA is a distribution received from an employer's qualified retirement plan that is rolled over into an IRA.

Full browser ?