Nondiscrimination Rule

AAA

DEFINITION of 'Nondiscrimination Rule'

A clause found in qualified retirement plans stating that all employees of a company must be eligible for the same benefits, regardless of position within the company. The rule keeps plans from being discriminatory toward highly-compensated employees and company executives. Nondiscrimination rules are required for a plan to be considered qualified under the Employee Retirement Income Security Act (ERISA).


INVESTOPEDIA EXPLAINS 'Nondiscrimination Rule'

A company may offer non-qualified plans (meaning that contributions are not tax deductible) that are discriminatory or selective in nature, in addition to standard qualified plans.

Nondiscrimination rules must be kept up even when retirement plans such as 401(k)s are amended or transferred to another trustee, according to ERISA guidelines.


RELATED TERMS
  1. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  2. Plan Sponsor

    A designated party, usually a company or employer, that sets ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  5. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  6. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
RELATED FAQS
  1. How is an SBO-401(k) set up?

    Small Business Owner 401(k) plans have grown in popularity following changes enacted through the Economic Growth and Tax ... Read Full Answer >>
  2. I make over $100,000/yr and my adjusted gross income precludes standard IRA contributions. ...

    With an adjusted gross income (AGI) of more than $100,000, only your eligibility to deduct contributions to a Traditional ... Read Full Answer >>
  3. How do gains from my 401(k) figure into my taxable income?

    Capital gains from a 401(k) account figure into taxable income in that capital gains are taxed at the ordinary income rate ... Read Full Answer >>
  4. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  5. How much will an employer generally contribute to a 401(a) plan?

    The amount an employer contributes to an employee's 401(a) retirement savings plan can vary from plan to plan. 401(a) plans ... Read Full Answer >>
  6. When can benefits be received from a provident fund?

    Like most retirement savings vehicles, participants in provident funds are eligible to receive benefits at retirement. However, ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  2. Options & Futures

    Retirement Planning Basics

    Realizing your post-work goals need not be daunting. We'll tell you everything you need to know to get - and stay - on track.
  3. Taxes

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

    What Does an Ideal Retirement Portfolio Look Like?

    The "ideal" portfolio can differ from one investor to another depending on many factors, but some themes hold true no matter what.
  5. Investing

    How to Protect Your Retirement After a Divorce

    Divorce is never fun, but knowing the rules and anticipating the impact of retirement plan division and pension payouts can make things easier.
  6. Retirement

    Calculating Volume Weighted Average Price

    Volume weighted average price, or VWAP, is the average value of a stock traded over the course of a set time horizon, which is typically one day.
  7. Professionals

    Which Robo-Advisor is Right for You?

    Which robo-advisor is right for you? There are many factors to consider, including breadth of services, ease of use and cost.
  8. Retirement

    401(k) Rollovers: The Tax Implications

    The tax rules for 401(k) rollovers can be simple or more complex, depending on which path you take.
  9. Retirement

    Avoid These 4 Retirement Account Mistakes

    The top 4 mistakes investors should avoid in their retirement accounts.
  10. Professionals

    Surviving Your First Year As A Trader

    These tips will reduce the learning curve for first-year traders.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!