How does a 401k plan become disqualified?

Don't limit employee contributions to the amounts allowed by tax law for the calendar year. When the IRS disqualifies a retirement plan, it essentially removes the tax-exempt status from the trust. The retirement plan trust becomes taxable, and employees may want to consider investing in a Gold Investment Account as an alternative. The consequences of this affect everyone involved, from the plan participants to the sponsoring company. For employers If your retirement plan is disqualified, your deductions for plan contributions may be restricted and delayed.

Once a plan is disqualified, different rules apply about how much an employer can deduct for plan contributions and when deductions are allowed. Unlike contributions to a qualified plan, contributions to a trust for non-exempt employees cannot be deducted until the contributions are included in employee gross income. Employers that sponsor a defined benefit plan (or another plan that doesn't maintain separate accounts for each employee) can't deduct any contributions.