Understanding Qualified Retirement Plans: A Comprehensive Guide

A qualified retirement plan is a type of plan that is commonly offered by many employers across the country. In order to be a qualified retirement plan, it has to meet certain criteria that are set forth by the IRS. Here are the basics of the qualified retirement plan.

Qualified Plan

A qualified retirement plan is one that is set up by an employer in order to benefit the employees that work there. This type of plan has to be registered with the IRS and has to fill out tax documents every year. In exchange for the extra paperwork and sticking to the rules, the IRS grants this type of plan certain tax advantages. In most cases, it allows individuals to contribute pretax money to a retirement account. It also allows the earnings in the account to grow on a tax-free basis. In some cases, the contributions are on an after-tax basis and the earnings are then allowed to accumulate tax-free.

Types of Plans

There are a few plans that would qualify as a qualified retirement plan. The 401k, SIMPLE IRA and SEP IRA are some examples of qualified retirement plans. A traditional IRA or a mutual fund would not be a qualified plan.