Non-Qualified Plans
A non-qualified plan is a type of tax-deferred or tax-advantaged, employer-sponsored plan that falls outside of the Employee Retirement Income Security Act (ERISA) guidelines. Non-qualified plans are able to be customized to meet specialized retirement needs for key executives and other select employees. These types of plans can be used as attractive recruitment or employee retention tools. Non-qualified plans are also exempt from the discriminatory and top-heavy testing that qualified plans are subject to. The contributions made to these types of plans are treated differently for taxes than a qualified plan. However, in many cases they allow employees to defer taxes until retirement (when they presumably will be in a lower tax bracket). Non-qualified plans are often used to provide specialized forms of compensation to key executives or employees instead of making them partners or part owners in a company or corporation. The main consideration of a non-qualified plan is to allow key employees and highly compensated employees to contribute a much larger portion of their income to another retirement plan typically after their qualified retirement plan contributions have been maxed out. |
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