Final answer:
The incorrect option is that employer-provided qualified plans allow discrimination in favor of highly compensated employees. These retirement plans aim to recruit new personnel, enable a dignified retirement for older workers, and motivate all employees. Commonly found plans include 401(k)s and 403(b)s, which offer tax benefits and portability.
Step-by-step explanation:
The one option which is NOT an advantage of an employer-provided qualified plan is that it allows the employer to discriminate in favor of highly compensated employees. Qualified retirement plans are required to comply with certain rules that ensure they do not excessively benefit high earners at the expense of lower-paid employees. The benefits that such plans provide include
- Aiding in the recruitment of new personnel,
- Allowing older workers to retire with dignity, and
- Motivating employees.
These plans, such as 401(k)s and 403(b)s, have become more prevalent compared to traditional pension plans. They offer tax-deferred growth and portability, meaning they can be carried over when an employee moves to a different employer. This flexibility and the capability to earn real rates of return help retirees ward off the erosion of their savings due to inflation.