Non-Qualified Plan

What is a 'Non-Qualified Plan'

A non-qualified plan is any type of tax-deferred, employer-sponsored retirement plan that falls outside of employee retirement income security act (ERISA) guidelines. Non-qualified plans are designed to meet specialized retirement needs for key executives and other select employees. These plans also are exempt from the discriminatory and top-heavy testing that qualified plans are subject to.

BREAKING DOWN 'Non-Qualified Plan'

There are four major types of non-qualified plans:

1) Deferred compensation plans
2) Executive bonus plans
3) Group carve-out plans
4) Split-dollar life insurance plans

The contributions made to these plans are usually nondeductible to the employer, and are usually taxable to the employee as well. However, they allow employees to defer taxes until retirement, when they are presumably in a lower tax bracket. Non-qualified plans are often used to provide specialized forms of compensation to key executives or employees in lieu of making them partners or part owners in the company or corporation.

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RELATED FAQS
  1. What is the difference between qualified and non-qualified plans?

    Qualified and non-qualified retirement plans are created by employers with the intent of benefiting employees. The Employee ... Read Answer >>
  2. Mike is a highly compensated employee of XYZ Company, his company has offered him ...

    The correct answer is b): One of the most common types of nonqualified retirement plans is the deferred compensation plan. ... Read Answer >>
  3. Can you fund nonqualified deferred compensation plans with life insurance?

    Understand if a person can fund nonqualified deferred compensation plans with life insurance. Learn what types of plans are ... Read Answer >>
  4. Based on the Employment Retirement Income Security Act (ERISA), a retirement plan ...

    The correct answer is b. With regard to eligibility, the plan must cover all employees 21 and older who have worked for the ... Read Answer >>
  5. Is a Simplified Employee Pension (SEP) part of the Employee Retirement Income Security ...

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  6. What is the best retirement plan option for a physician with her own practice, employees ...

    It is very unlikely that you will find a qualified plan or an IRA-based plan that will allow the employer to exclude other ... Read Answer >>
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