Qualified pension plans are the tax-advantaged vehicles that businesspeople use to save for retirement. These are the pension and profit-sharing plans that, because they meet certain conditions set down by the tax law, provide tax advantages to employers and employees alike for retirement savings. The advantage to the employer is that he may claim a deduction at the time that he sets money aside for his employees, including himself. The advantage for the employee is that, even though money has been set aside for his benefit, he is not taxed on the money until he receives it, normally at retirement. Moreover, the money that is earned on those set-aside funds is tax-free to the employee until he receives it.
Since qualified pension plans are such a good deal for everyone, it should surprise no one that all these advantages come at a price. Before you embark on a pension program, it's important to be sure that you are prepared to pay that price.