An example of a tax-qualified retirement plan would be a

• A. Defined contribution plan
• B. Defined benefit plan
• C. Nonqualified plan
• D. Cash balance plan

Answer: (A)

Tax-qualified retirement plans receive favorable tax treatment under the Internal Revenue Code and ERISA, meaning contributions may be deductible and earnings grow tax-deferred until withdrawal, with distributions taxed as ordinary income (subject to qualified distributions rules).

A defined contribution plan is the classic example of this: contributions are made to an individual account for each participant, and the eventual retirement benefit depends on how those funds are invested and grow over time. Because it’s designed to meet qualification requirements, it qualifies for the tax advantages.

Defined benefit plans and cash balance plans are also typically tax-qualified, but the straightforward, everyday illustration most people recognize is a defined contribution plan (like a 401(k)). A nonqualified plan does not receive these tax advantages.