Qualified Plan or Trust

Tax-Deferred plan set up by an employer for employees under 1954 Internal Revenue Service rules. Such plans usually provide for employer contributions-for example, a profit-sharing or pension plan-and may also allow employee contributions. They build up savings, which are paid out at retirement or on termination of employment. The employees pay taxes only when they draw the money out. When employers make payments to such plans, they receive certain deductions and other tax benefits. See also 401(k) Plan; Salary Reduction Plan.