Legal Definitions - qualified pension plan

A qualified pension plan is a retirement plan established by an employer or an employee organization that complies with federal law (ERISA). This type of plan allows employees to receive tax benefits for contributions and tax-deferred investment growth.

Examples of qualified pension plans include:

• Defined-contribution pension plan: A plan in which both the employer and the employee contribute.
• Defined pension plan: A plan in which the employer promises specific benefits to each employee.
• Noncontributory pension plan: A plan contributed to only by the employer.

For instance, a defined-contribution pension plan may require an employer to match an employee's contribution up to a certain percentage of their salary. This plan allows employees to save for retirement while receiving tax benefits and employer contributions.

On the other hand, a defined pension plan promises a specific benefit to each employee upon retirement. This plan is beneficial for employees who want a guaranteed retirement income.

Overall, a qualified pension plan is an important tool for employees to save for retirement while receiving tax benefits and employer contributions.