Qualified Retirement Plan

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What is a 'Qualified Retirement Plan'

A type of retirement plan established by an employer for the benefit of the company’s employees. Qualified retirement plans give employers a tax break for the contributions they make for their employees. Qualified plans that allow employees to defer a portion of their salaries into the plan also reduce employees’ present income-tax liability by reducing taxable income. Qualified retirement plans help employers attract and retain good employees.

Explaining 'Qualified Retirement Plan'

Qualified plans come in two types: defined benefit and defined contribution. 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 pension is an example of a defined benefit plan. Under defined contribution plans, the amount employees receive in retirement depends on how well they save and invest on their own behalf during their working years. A 401(k) plan is an example of a defined contribution plan.

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books.google.com [PDF]
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Financial incentives and retirement: evidence from federal civil service workers
www.sciencedirect.com [PDF]
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papers.ssrn.com [PDF]
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Discrimination Rules for Qualified Retirement Plans: Good Intentions Confront Economic Reality
www.jstor.org [PDF]
… assets and enter “accumulation” phase, during which they stockpile assets for the final, retired phase of … 40 percent of US workers have calculated how much they will need to retire on, 30 … Withdrawal restrictions on IRAs and 401 (k) s and other retirement plans also appear to be …

Employee education and the likelihood of having a retirement savings program
papers.ssrn.com [PDF]
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Handbook of consumer finance research
link.springer.com [PDF]
… assets and enter “accumulation” phase, during which they stockpile assets for the final, retired phase of … 40 percent of US workers have calculated how much they will need to retire on, 30 … Withdrawal restrictions on IRAs and 401 (k) s and other retirement plans also appear to be …

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www.aeaweb.org [PDF]
… assets and enter “accumulation” phase, during which they stockpile assets for the final, retired phase of … 40 percent of US workers have calculated how much they will need to retire on, 30 … Withdrawal restrictions on IRAs and 401 (k) s and other retirement plans also appear to be …

How persistent low expected returns alter optimal life cycle saving, investment, and retirement behavior
www.nber.org [PDF]
… assets and enter “accumulation” phase, during which they stockpile assets for the final, retired phase of … 40 percent of US workers have calculated how much they will need to retire on, 30 … Withdrawal restrictions on IRAs and 401 (k) s and other retirement plans also appear to be …

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Q&A About Qualified Retirement Plan

What are two types of qualified retirement plans?

Defined contribution and defined benefit.

How do employers attract good employees with a qualified retirement plan?

Employers can reduce their present income tax liability by reducing taxable income through contributions made into the employee's qualified retirement account.

What is a defined benefit plan?

A guaranteed payout given to employees and placed on the employer to save and invest properly.

How does an employee receive money in their qualified retirement account?

Employees receive money from their accounts when they retire or if they leave before age 59½, become disabled, or die. They may also withdraw funds early if they pay penalties and taxes on any earnings withdrawn before age 59½. The amount received depends on how much was contributed to the account over time as well as investment gains or losses during that time period. If there are insufficient funds in the account at withdrawal, participants must make up for any shortfalls themselves (unless otherwise specified). In addition, withdrawals prior to age 59½ will be subject to federal income tax withholding at ordinary rates plus 10% penalty unless an exception applies."

What is a qualified retirement plan?

A type of retirement plan established by an employer for the benefit of the company's employees.

What is a traditional pension?

A defined benefit plan that gives employees a guaranteed payout.

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