qualified plan

A retirement plan set up by businesses that allows the company to make tax-deductible contributions either through a profit-sharing plan or a pension plan. Employees also may be able to make their own contributions. The amount paid into a qualified plan is returned to the employee when he or she leaves the company or retires. For a small business, qualified plans are more complex than simplified employee pension (SEP) plans or Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) plans; however, these plans allow more flexibility in the plan design. Employers can deduct their contributions from taxes and employees are not taxed on their funds until they are withdrawn. See also SIMPLE IRA and simplified employee pension plan.