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Qualified Plan
Practical Law Glossary Item 9-502-1856 (Approx. 3 pages)
Glossary
Qualified Plan
An employee pension benefit plan that meets the requirements of Internal Revenue Code (Code) Section 401(a) and is entitled to the following preferential tax treatment:
- Contributions are currently deductible.
- Participants are not currently taxed on their benefits.
- The trust is not subject to taxation.
There are different types of qualified plans, including:
- Defined contribution plans (such as 401(k) plans and profit-sharing plans).
- Simplified Employee Pension Plans (SEPs)
- SIMPLE Plans.
Each of these types of plans are subject to different rules under the Code and, in some cases, under ERISA. In some qualified plans, such as 401(k) plans, employees may also be permitted to make tax-deferred contributions. Certain qualified plans are subject to the fiduciary duty requirements of ERISA and the prohibited transaction provisions of the Code. For more information, see Practice Notes, Requirements for Qualified Retirement Plans and ERISA Fiduciary Duties: Overview.