1. 401(k) And Qualified Plans: Introduction
  2. 401(k) And Qualified Plans: Types Of Plans
  3. 401(k) And Qualified Plans: Eligibility Requirements
  4. 401(k) And Qualified Plans: Contributions
  5. 401(k) And Qualified Plans: Distributions
  6. 401(k) And Qualified Plans: Conclusion

By Denise Appleby

A qualified plan is established by an employer to provide retirement benefits for employees and their beneficiaries. Qualified plans can come in a few different flavors. Let's recap:

  • A qualified plan may be a defined-benefit plan or a defined-contribution plan.
  • Retirement benefits are based on compensation, years of service and age for defined benefit plansĀ 
  • Varieties of qualified plans include profit-sharing or stock-bonus plans, money-purchase pension plans, 401(k) plans, age-weighted plans and employee stock ownership plans (ESOPs).
  • Any business, including sole proprietorships, partnerships, corporations and government entities may adopt a qualified plan.
  • A qualified plan may be funded with employer contributions and employee contributions, depending on the type of plan.
  • Employee compensation in excess of the compensation cap may not be considered for the purposes of making plan contributions.
  • An employer may contribute up to 25% of compensation to each eligible employee's account provided the contribution does not exceed $51,000.
  • Distributions before an employee reaches the age of 59.5 are taxed an additional 10%, unless the employee qualifies for an exception.

Related Articles
  1. Retirement

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  2. Retirement

    What's a Qualified Retirement Plan?

    Employers establish qualified retirement plans to help their employees save money.
  3. Retirement

    How Does a Pension Plan Work?

    A pension plan is a savings plan maintained by an employer on behalf of its employees for their retirement.
  4. Financial Advisor

    SEP vs. Keogh Plans: Which is Right for You?

    SEP and Keogh plans each have their pros and cons. Here's how to choose which one is right for you.
  5. Retirement

    This Is Why Your Employer Should Offer a 401(k)

    Understand the unique benefits that come with a small business offering a retirement savings plan such as a 401(k) to current and future employees.
  6. Retirement

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
  7. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  8. Retirement

    Comparing Qualified And Non-Qualified Plans

    Qualified and non-qualified retirement plans are created by employers to benefit their employees.
  9. Retirement

    Deferred Compensation Plans for Nonprofits

    Learn about the two types of deferred compensation plans that nonprofit companies can use to allow high-ranking employees to increase their retirement savings.
  10. Financial Advisor

    Advising FAs: Explaining Estate Planning to a Client

    As the old saying goes, you can't take it with you. For this reason, it is important to have a current estate plan in place to protect your family and belongings.
Trading Center