If a retirement plan is considered qualified, what does this indicate about its tax treatment?

A retirement plan that is considered qualified indicates that it has favorable tax treatment under the Internal Revenue Code. This designation allows contributions made to the plan to be tax-deductible for the employer and potentially tax-deferred for employees until distributions are taken, usually upon retirement. The favorable tax treatment includes provisions such as tax-deferral on earnings and distributions that may be subject to lower tax rates based on individual circumstances at the time of withdrawal.

While certain penalties and requirements may apply to qualified plans, such as potential early withdrawal penalties or mandates for covering employees, these aspects do not encompass the core tax treatment implications of the plan's qualified status. The primary benefit that qualified plans provide is their favorable tax status, making option B the most accurate choice.