Welcome to Executive Benefit Plans, Inc.


Main Link Column
Select this link Retirement Plans
Select this link Strategies
Select this link Employee Benefits
Select this link Individual Benefits
Select this link Participant Info
Select this link White Papers
Select this link Consulting Service
Select this link Proposal Request
Select this link Administration
Select this link Contact
Select this link News
Select this link Blog
Select this link Home


Non-qualified Retirement Plans

In the employer-employee relationship, nothing says "I love you" more than compensation. A pat on the back or some token of appreciation are nice, but let's face it: The essence of the employer-employee relationship is based on an exchange of the employee's services for the employer's money or similar form of tangible compensation. Usually, the higher the value of an employee is, the more compensation the employee gets from the employer.

Compensation, of course, can take many forms. In addition to regular wages, employers often offer their employees compensation packages that may include a mixture of such benefits as health insurance, paid time off, tuition reimbursement and qualified plans that help to save for retirement. When it comes to qualified retirement plans, the rules generally require that an employer's basic compensation package be equally available to all employees in order to get the associated tax benefits (though the benefits employees receive can be provided in proportion to their wages, years of service, job title, or other grouping).

If an employer really and truly loves an employee, however, the employer will compensate the employee above and beyond the basic compensation package provided to rank-and-file employees. This is where nonqualified deferred compensation plans come in. An employer can use a nonqualified plan to provide added incentives to attract and retain key executives and employees.

A nonqualified plan is an employer-sponsored retirement or other deferred compensation plan that does not meet the tax-qualification requirements under Internal Revenue Code Sec. 401 (i.e. qualified plan requirements). A nonqualified plan also does not refer to a tax-sheltered annuity (TSA), a simplified employee pension (SEP) plan, a Savings Incentive Match plan for Employees (SIMPLE) account, or a 457 governmental plan. Retirement plans like TSAs, SEPs, and SIMPLEs are governed by their own rules.

A nonqualified plan allows an employee to defer the receipt of taxable wages or bonuses until some future year when (hopefully) the employee is in a lower tax bracket, thereby paying less in taxes when the compensation is received. Although nonqualified plans are easier to set up than qualified plans, there are specific rules that must be followed to achieve the objective of deferring an employee's taxable compensation. All nonqualified plans must satisfy the following three requirements:

  • The deferred compensation arrangement between the employer and the employee must be entered into before the compensation is earned by the employee.

  • The deferred compensation cannot be available to the employee until a previously agreed upon future date or event.

  • The amount of the deferred compensation cannot be secured (i.e. it must remain available to the employer's creditors).

For Professional Consultation Services Contact:
Executive Benefit Plans, Inc.
Suite 1188
1186 Route 56 East
Apollo, PA 15613-9725 USA

Phone: 800-622-2411 or Fax: 724-478-1688
E-mail -

Contact Us  |  Proposal Request

To Open, Review, and/or Print our Corporate Brochure - Click Here 

Retirement Plans

Select this link Consulting Services

Select this link Qualified Plans

   Select this link Savings Calculator

   Select this link  401k

   Select this link Safe Harbor 401k

   Select this link Roth 401k

   Select this link SIMPLE 401k

   Select this link Profit Sharing

   Select this link Money Purchase

   Select this link Defined Benefit

   Select this link Cash Balance

   Select this link Successor Plan Rule

   Select this link IRC 401(a)

   Select this link ERISA 404(c)

   Select this link Prohibitive Transactions

   Select this link Fiduciaries

   Select this link Contribution Limits

   Select this link Controlled Groups

Select this link Other Plans

   Select this link IRAs

   Select this link 419(e)

   Select this link SEPs

   Select this link SARSEPs

   Select this link SIMPLE IRA

Other Links

Select this link Tests

    Select this link ACP Test

    Select this link ADP Test

Select this link Restatements

Select this link Amendments

Select this link Mistakes

Select this link Catch-up

Select this link Funding Limits

Select this link EGTRRA Q&A

Select this link Conduit IRA

Select this link Pricing

Select this link Quote

Select this link White Papers

Select this link FAQs

Select this link Glossary


Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM


Privacy Statement - Executive Benefit Plans, Inc. Copyright 1996 - 2015 All Rights Reserved - Legal Statement
Website Powered by UHSystems