What does it mean for a plan to be "qualified?" Quite simply, a plan is qualified (and thus eligible for favorable tax treatment) when it conforms to certain terms and conditions set forth in the Internal Revenue Code (also called the Tax Code or, simply, the Code). These qualification requirements exist as a quid pro quo for the favorable tax treatment realized by qualified plans.

A qualified retirement plan is an employee benefit plan that, in return for complying with Internal Revenue Code requirements, qualifies for certain income tax advantages. The two tax advantages common to most qualified retirement plans are:

• Pre-Tax or Tax-Deductible Contributions — Contributions to most qualified retirement plans are not considered taxable income to participating employees. Employer contributions made on behalf of participating employees may be deductible by the employer.

  (Note: In the case of Roth contributions made to a qualified plan, the contributions are not made pre-tax; they are made with after-tax monies.)

• Tax-Deferred Accumulations — Qualified retirement plan contributions accumulate on a tax-deferred basis. Taxation occurs only when benefits are distributed to plan participants or their beneficiaries.

  (Note: In the case of Roth contributions made to a qualified plan, the contributions do accumulate tax free and benefits may be paid tax-free only if certain criteria, as outlined by the IRS, are met).

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