Qualified Plans

Federal law imposes a series of legal requirements on the vast majority of employment-based retirement plans in the private sector. Many of those criteria must be met for a plan to qualify for tax-favored treatment--hence the term "qualified plans"--but others must be met regardless of a plan's tax status. Qualification requirements are intended to ensure that participants receive the pension benefits they have been promised, that tax benefits are available to rank-and-file workers as well as to highly compensated employees, and that companies and participants do not use pension funds to shelter too much income from taxation.

Among the most significant requirements for qualification are:

• Nondiscrimination Rules,



• Vesting Requirements,



• Limits on Contributions or Benefits,



• Minimum Funding Standards,



• Distribution Requirements, and



• Top-Heavy Rules.