Glossary
Qualified Plan
A qualified plan is an employer retirement plan that meets IRS requirements under the tax code and therefore receives favorable tax treatment — deductible contributions, tax-deferred growth, and protected trust assets.
401(k)s, profit-sharing plans, defined benefit pensions, and cash balance plans are qualified plans. Qualification comes with obligations: broad employee coverage, nondiscrimination testing, vesting standards, and ERISA fiduciary duties. IRAs, by contrast, are tax-advantaged but not "qualified plans" in the technical sense, and some rules differ between the two.
Why it matters in practice
The label determines real protections and options: qualified plan assets enjoy strong federal creditor protection, plan loans are possible, and certain tax strategies (like net unrealized appreciation treatment) exist only for qualified plans. For employers, keeping a plan qualified — following its own document, testing on time, adopting required amendments — is the ongoing work that administrators and TPAs are hired to manage.
Related terms: 401(k) · ERISA · Defined Benefit Plan · Nondiscrimination Testing · Third-Party Administrator