Mike is a highly compensated employee
of XYZ Company, his company has offered him a nonqualified
retirement plan as an added incentive for better performance.
The plan is exempt from ERISA participation requirements
and only offered to top executives. Which of the following
plans was most likely offered to Mike?
a) Defined Benefit Pension Plan
b) Deferred Compensation Plan
c) Profit-Sharing Plan
d) 401(k) Plan
The correct answer is b):
One of the most common types of nonqualified retirement
plans is the deferred compensation plan. For many years,
corporations have used nonqualified deferred compensation
plans for their highly compensated employees. They
allow the employee to defer their pay until a later
date, usually after retirement to take advantage of
lower tax brackets. No reporting or disclosure information
is required and the agreement is based on the full
faith and credit of the corporation. All of the other
answer choices are examples of qualified plans.