What constitutes a qualified retirement plan?

A qualified retirement plan is defined by its compliance with specific regulations established by the Internal Revenue Service (IRS). These regulations are designed to provide tax benefits to both the plan sponsors (usually employers) and the participants (employees). When a retirement plan meets these IRS requirements, it can offer tax-deferred growth on contributions and earnings, as well as potential tax deductions for contributions made by employers.

The significance of these tax benefits cannot be overstated; they encourage both individuals and businesses to save for retirement while also reducing their taxable income. This factor sets qualified plans apart from non-qualified plans, which do not meet IRS guidelines and, as a result, do not offer these favorable tax treatments.

In contrast, other options presented do not capture the essence of what makes a retirement plan "qualified." A plan based solely on stocks or one that requires no contributions from employers is not reflective of the foundational requirements set by the IRS. Additionally, withdrawal limitations are part of different regulations that dictate access to funds, but they do not define qualification status. Therefore, the correct understanding of a qualified retirement plan centers on its adherence to IRS regulations for tax benefits, which is why this answer is the most accurate.