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Tips & Takes What Qualifies a Retirement Plan? An employer-sponsored retirement plan that complies with the Employee Retirement Income Security Act (ERISA) of 1974 and certain provisions of the Internal Revenue Code (IRC) is "qualified" to accept employer contributions. Additionally, the earnings on contributions held in the plan are not taxable until withdrawals are made. A full range of qualified retirement plan types, designed to fully comply with ERISA and the IRC, are available to employers of all sizes. These tax-deferral provisions are an advantage if the employee is in a lower federal tax bracket when he or she begins receiving distributions from the plan at retirement. ERISA and the IRC provide specific rules about the amount and timing of distributions. Nonqualified plans that defer compensation until some future time are based on agreements between the employer and the employee that promise payment at a later date for services performed currently. One similarity between qualified and nonqualified plans is the premise that the employee will be in a lower federal income tax bracket when payment is made, usually at retirement. CRN200802-2013736

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