There are many retirement planning schemes, ranging from putting money under a mattress or in an offshore account to establishing a qualified plan. In the pension planning universe, we are dealing with deferred compensation.
Deferred compensation is not taxable until received. There are basically two ways of receiving such compensation; through Qualified Plans and Non-Qualified Plans.
Under Non-Qualified Plans, and employee is not taxed on money set aside by his employer, as long as there is a substantial risk of forfeiture. This is similar to a performance clause in a sports figure's contract. Some goal in the future must be achieved before the money is earned. The employer gets no deduction for any money set aside (if indeed any is set aside). The deduction comes when the compensation is paid; taxable to the employee, deductible to the employer.
Under Qualified Plans, money is put into a trust one behalf of the employee. It is not taxable to the employee, and is deductible, within certain limits, by the employer.
If money is set aside under a Non-Qualified Deferred Compensation Plan, earnings on the money are usually taxable each year. (A number of strategies, usually employing insurance contracts, can beat this tax bite.)
Earnings on funds in a Qualified Plan's trust accumulate tax free.
To earn the status of "Qualified", with the inherent tax advantages, there are many requirements to be met regarding eligibility, participation, accruals, and vesting. The thought is, if the Treasury is being denied tax dollars, a social agenda must be furthered.