Nondiscrimination Rule

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).


BREAKING DOWN '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. Non-Qualified Plan

    Any type of tax-deferred, employer-sponsored retirement plan ...
  3. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  4. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
  5. Auto Enrollment Plan

    An employer’s decision to sign employees up to have a percentage ...
  6. Determination Letter

    A formal document issued by the IRS that decrees whether or not ...
Related Articles
  1. Retirement

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  2. 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.
  3. Retirement

    Comparing Qualified And Non-Qualified Plans

    Qualified and non-qualified retirement plans are created by employers to benefit their employees.
  4. Retirement

    What's a Qualified Retirement Plan?

    Employers establish qualified retirement plans to help their employees save money.
  5. Retirement

    Tough Times: Should You Dip Into Your Qualified Plan?

    401(k)s, pensions and profit-sharing plans can be a source of cash, but there are consequences to this option.
  6. Managing Wealth

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
  7. Retirement

    The Basics Of A 401(k) Retirement Plan

    This plan has become one of the most popular retirement options. Find out why.
  8. Retirement

    This Is Why Your Employer Should Offer a 401(k)

    Understand the unique benefits that come with a small business offering a retirement savings plan such as a 401(k) to current and future employees.
  9. Retirement

    How Does a Pension Plan Work?

    A pension plan is a savings plan maintained by an employer on behalf of its employees for their retirement.
  10. 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.
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. 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 >>
  3. Is a Simplified Employee Pension (SEP) part of the Employee Retirement Income Security ...

    Understand when a SEP plan falls under ERISA, how this act protects individual retirement savings and why the SEP is a popular ... Read Answer >>
  4. Who is eligible for a qualified retirement plan?

    Meeting eligibility requirements for a qualified retirement plan vary but generally dictate a minimum age and a the amount ... Read Answer >>
  5. Are Simple IRA plans subject to ERISA?

    Learn how the Employee Retirement Investment Security Act, or ERISA, guides the administration of Savings Incentive Match ... Read Answer >>
  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 >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center