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 plans
  • 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.







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