What Is a 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 therefore 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.

Best Qualified Retirement Plan

Understanding Qualified Retirement Plans

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 qualified retirement plan meets IRS requirements and offers certain tax benefits.
  • 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.
  • Employers offer retirement plans to attract and retain employees.
  • Taking contributions out of a retirement plan before retirement age can often result in tax penalties.

Contact for Best Qualified Retirement Plan

Under defined contribution plans, the amount employees receive in retirement depends on how well they save and earn through investment on their own behalf during their working years. The employee bears all the investment and longevity risk and is expected to be a financially savvy saver. A 401(k) is the most popular example of a defined contribution plan. Other examples of qualified plans include the following:

  • Profit-sharing plans
  • 403(b) plans
  • Money purchase plans
  • Defined benefit plans
  • Employee stock ownership (ESOP) plans
  • Salary Reduction Simplified Employee Pension (SARSEP)
  • Simplified Employee Pension (SEP)
  • Savings Incentive Match Plan for Employees (SIMPLE)

In simplest terms, a qualified retirement plan is one that meets ERISA guidelines, while a non-qualified plan falls outside of ERISA guidelines. Some examples:

Qualified plans include 401(k), profit sharing plans, 403(b), and Keogh (HR-10) plans.

Non-qualified plans include deferred-compensation, split-dollar life insurance, and executive bonus plans.

Types of Retirement Plans

  • Individual Retirement Arrangements (IRAs)
  • Roth IRAs
  • 401(k) Plans
  • 403(b) Plans
  • SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
  • SEP Plans (Simplified Employee Pension)
  • SARSEP Plans (Salary Reduction Simplified Employee Pension)
  • Payroll Deduction IRAs
  • Profit-Sharing Plans
  • Defined Benefit Plans
  • Money Purchase Plans
  • Employee Stock Ownership Plans (ESOPs)
  • Governmental Plans
  • 457 Plans
  • Help with Choosing a Retirement Plan

Choosing the right retirement plan for your business

Many business owners today are faced with an increasing need to provide a retirement benefit for themselves and their employees. At Raymond James, listening to you and helping you and your employees plan for retirement are top priorities. Selecting the right retirement plan for your business is a crucial step, and providing one has many benefits.

One advantage is that contributions to a retirement plan today can help you meet tomorrow’s goals of financial security.

Another is that establishing a retirement plan may provide tax advantages. Eligible contributions are deductible expenses to your business, and all contributions grow tax-deferred until withdrawn.1

1 Additionally, eligible small employers will receive a tax credit equal to the lesser of $500 or 50% of the startup costs associated with the plan.

Still another benefit is that it can create positive employee relations, helping to attract and retain quality employees, while reducing turnover.

For many business owners, the question is not “Should I implement a retirement plan?” Rather, it is “Which plan is right for my business?” The choices are many: SEP, profit sharing, 401(k), SIMPLE IRA and defined benefit, to name a few.

This web page is designed to resolve some of the confusion caused by the wide range of choices available to business owners like you. It offers an overview of the features and advantages of the different types of plans, as well as a chart that provides a more detailed look at the specific characteristics of:

  • Simplified Employee Pension (SEP)
  • Profit sharing
  • Age-weighted/comparability profit sharing plans
  • 401(k) profit sharing
  • Safe-harbor 401(k)
  • Owner only/one-person 401(k)
  • Defined benefit pension

People also ask/FAQ

  1. What is the difference between a qualified and nonqualified retirement plan?
  2. What is considered a non-qualified retirement plan?
  3. Does a non-qualified retirement plan need IRS approval?
  4. How do non-qualified plans work?
  5. What is considered a non-qualified retirement plan?
  6. Does a non-qualified retirement plan need IRS approval?
  7. How do non-qualified plans work?
  8. What type of accounts are non-qualified?
  9. Do I annually maximize my contributions to traditional retirement plans and other savings options?
  10. Will my tax rate change in the future and can I afford to defer compensation?
  11. Is the company financially secure?
  12. Does the plan allow a flexible distribution schedule?
  13. What investment choices does the plan offer?
  14. Is NQDC plan participation appropriate for me?