Despite the complexity which governs the tax aspects of establishing, maintaining and distributing assets from a qualified retirement plan, the main attraction remains: the employer may currently deduct its contributions and a plan participant will not be taxed on the contributions until the contributions are actually distributed to the participant.

Before an employer contribution is deductible, it must satisfy two tests: it must be an "ordinary and necessary" business expense when considered, together with all other compensation paid in light of the value of the services rendered by a participant and the contribution must meet certain statutory requirements.

The contribution must be made not later than the due date of the employer's tax return, as extended, even if the employer reports all other income and expense on the cash basis method of accounting. For example, a consultant who reports on the calendar year and employs the cash basis method of accounting reports income only when the cash is received and deducts an expense only when the expense is paid, may deduct a contribution to a qualified plan after the close of the consultant's calendar year if made before the due date of the consultant's tax return, as extended.