Top Hat Plan

AAA

DEFINITION of 'Top Hat Plan'

A form of retirement plan available only to selected company employees - usually key executives. Such plans are different from standard retirement plans in a number of ways:


1) They don't usually offer the same tax benefits of an opt-in plan.
2) Not everybody can participate - even those of equal company stature may have different plans.


Generally, there are two types of top hat plans: a nonqualified deferred compensation plan and a supplemental executive retirement plan. The former allows participants to defer income into the plan during each calendar year, while the latter is funded entirely by the employer.

INVESTOPEDIA EXPLAINS 'Top Hat Plan'

Unlike opt-in retirement plans, a top hat plan is often exempt from many government regulations. Hence, the interest rate associated with the plan is usually higher than that offered by traditional retirement plan.

RELATED TERMS
  1. Tax-Deferred Savings Plan

    A savings plan or account that is registered with the government ...
  2. Pension Plan Administrator

    An individual responsible for managing the day-to-day affairs ...
  3. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Supplemental Executive Retirement ...

    A non-qualified retirement plan for key company employees, such ...
  6. Plan Participant

    A plan participant either contributes into a pension plan or ...
Related Articles
  1. Retirement

    Pension Plans: Pain Or Pleasure?

    Employees have a love/hate relationship with this retirement option.
  2. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  3. Retirement

    Outliving Your Retirement Savings

    Find out how this worst-case scenario can happen, and what you can do if it happens to you.
  4. Taxes

    5 Retirement Plan Moves To Make Before Year-End

    Make sure all your loose ends are tied with these simple reminders and tips for your plans.
  5. Professionals

    New 401(k) Pension Rollover Rule: Pros and Cons

    Is the new rule allowing participants to roll their 401(k) balances into pensions a good idea?
  6. Investing Basics

    Are You Investing With A Purpose?

    We all appreciate having a wide variety of investing choices, but a random collection of investments does not make an investing plan.
  7. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  8. Retirement

    Tapping Retirement Funds Early – Without A Penalty

    The IRS offers several ways to skirt the 10% penalty on early retirement distributions.
  9. Professionals

    Why Auto-Enrollment Will Save Your Retirement

    Savers need all the help they can get, even if it amounts to an offer they can't refuse. That's why the biggest improvement to 401(k)s is auto-enrollment.
  10. Professionals

    Retirement Planning Essentials for Your Clients

    You may have heard these retirement planning tips before, but has your client actually put them into action yet?

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center