Non-qualified employer-sponsored retirement plans are not required to meet specific IRS guidelines regarding contribution limits, vesting and employee coverage. Moreover, any contributions to these types of retirement plans do not grow tax-deferred.

Let's look at two types of non-qualified employer-sponsored retirement plans: deferred-compensation plans and payroll deduction plans.

  • Deferred-Compensation Plans: Deferred-compensation plans should not be confused with defined-contribution plans, nor with 457 governmental plans (also referred to as deferred compensation). They are simply contracts between employers and certain employees in which the employer agrees to pay a certain amount of compensation to the employee at a later date, usually at retirement or termination, and/or upon disability or death.

    A deferred-compensation plan can be either funded or unfunded. Funded plans are backed by specific employer assets that are not accessible to creditors, while unfunded plans are backed only by the promise of the employer.

  • Payroll Deduction Plans: Payroll deduction plans are simply product-purchase services set up by the employer to provide cheaper life insurance, mutual funds, variable annuities and other benefits to employees. Employees usually purchase these special products and services with after-tax deductions from their paychecks. Some employers may also decide to match a certain percentage of the employee's contribution, although they are not required to do so.


Individual Retirement Accounts (IRAs)

Related Articles
  1. Retirement

    5 Lesser-Known Retirement And Benefit Plans

    These plans aren't widely used, but they fill a specific niche for employees in certain situations.
  2. Retirement

    Comparing Qualified And Non-Qualified Plans

    Qualified and non-qualified retirement plans are created by employers to benefit their employees.
  3. Financial Advisor

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  4. Managing Wealth

    Deferred Compensation Plans for Nonprofits

    Learn about the two types of deferred compensation plans that nonprofit companies can use to allow high-ranking employees to increase their retirement savings.
  5. Financial Advisor

    4 Compensation Plans for Wealthy Earners

    Here's what advisors need to know about non-qualified deferred compensation plans.
  6. Retirement

    How We Can Help Close the Retirement Savings Gap

    The majority of Americans are not very confident about having enough for retirement.
  7. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  8. Retirement

    The Basics of a 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Here's why.
Frequently Asked Questions
  1. How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlation formula to correlate ...
  2. What is the Difference Between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ...
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ...
  4. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
Trading Center