What is a key feature of Qualified Plans?

A key feature of Qualified Plans is that they do not offer current taxable income. This means that the contributions made by both employers and employees to a qualified plan are made on a pre-tax basis, allowing for tax deferral until funds are withdrawn during retirement. This characteristic makes qualified plans attractive for both employers and employees, as it enhances saving potential by reducing immediate taxable income.

In contrast, while immediate tax deductions for employers, control over investments by employees, and the requirement for funding through trust assets are important considerations for other types of retirement plans or financial instruments, they do not specifically characterize qualified plans in the same context. Qualified Plans are defined under the Employee Retirement Income Security Act (ERISA) and must meet specific requirements to maintain their tax-advantaged status; not paying current taxes on contributions is a fundamental and distinguishing aspect of these plans.