Non-qualified plans are 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.
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.
Carroll Consultants, Ltd. draws from its experience in Non-qualified plans to ensure their clients are fully informed when structuring or restructuring a retirement package.