Which two categories constitute qualified retirement plans?

• A. Defined Benefit Plans and Defined Contribution Plans
• B. HMO and PPO
• C. Tax-Deferred Plans and Tax-Exempt Plans
• D. Non-qualified and Qualified Plans

Answer: (A)

Qualified retirement plans are those that meet IRS rules to receive favorable tax treatment. The two main categories that constitute qualified plans are defined benefit plans and defined contribution plans. A defined benefit plan promises a specific retirement benefit, usually based on salary and years of service, with the employer bearing the investment risk and funding obligations. A defined contribution plan, by contrast, sets up an individual account for each employee and specifies how much is contributed (by employer and sometimes employee); the eventual benefit depends on investment performance, so the employee bears investment risk. These two forms cover the primary ways employers provide tax-advantaged retirement options. The other choices don’t describe retirement plans that qualify for that tax treatment—health plan types (HMO/PPO) are unrelated, and terms like tax-deferred or tax-exempt describe tax treatment rather than plan categories, while non-qualified plans are explicitly not tax-qualified.