What is a Non-Qualified Retirement Plan?
Non-qualified retirement plans are deferred compensation plans that allow the employee to delay receiving earned wages and income until a later date. The employer is charged with the responsibility of maintaining the deferred income in a special fund until the employee retires or otherwise leaves the company. Contributions to a non-qualified retirement plan are generally not subject to taxes during the calendar year the earnings take place, but are subject to taxes when withdrawn from the plan. In general, governments do not provide a great deal of guidelines for the exact structure of a non-qualified retirement plan. For example, the Internal Revenue Service in the United States of America focuses on providing specific codes that deal with the establishment and operation of any qualified retirement plan, but do not have comparable rules for non-qualified plans. Instead of specific provisions, employers generally make use of broad tax regulations in structuring a non-qualified retireme
-TOP A: A retirement plan that is not given favorable tax treatment. Q: What is a SIMPLE-IRA? -TOP A: Savings Incentive March Plan for Employees (SIMPLE). Created by the Small Business Job Protection Act of 1996, a SIMPLE is a type of employer sponsored retirement plan. Individual SIMPLE IRAs are established by or on behalf of all eligible employees into which the employer must make annual SIMPLE contributions and employees may defer an amount (or percentage) of annual compensation. In general, employers with 100 or fewer eligible employees may establish a SIMPLE. Q: What is a Simplified Employee Pension or SEP? -TOP A: Created under the Revenue Act of 1978 to help small employers establish a pension plan, SEP’s are arrangements under which an IRA is established for each eligible employee. The employee is immediately vested in employer contributions and generally directs the investment of the money. These arrangements are sometimes called SEP-IRAs. SEPs must meet some qualified retirem
-TOP A: A retirement plan that is not given favorable tax treatment. N-6 Q: What is a SIMPLE-IRA? -TOP A: Savings Incentive March Plan for Employees (SIMPLE). Created by the Small Business Job Protection Act of 1996, a SIMPLE is a type of employer sponsored retirement plan. Individual SIMPLE IRAs are established by or on behalf of all eligible employees into which the employer must make annual SIMPLE contributions and employees may defer an amount (or percentage) of annual compensation. In general, employers with 100 or fewer eligible employees may establish a SIMPLE. N-7 Q: What is a Simplified Employee Pension or SEP? -TOP A: Created under the Revenue Act of 1978 to help small employers establish a pension plan, SEP’s are arrangements under which an IRA is established for each eligible employee. The employee is immediately vested in employer contributions and generally directs the investment of the money. These arrangements are sometimes called SEP-IRAs. SEPs must meet some qualified
These are plans are not put through the same qualification requirements (IRS and ERISA) and is not subject to such provisions as nondiscrimination, eligibility, funding and vesting. The trade off for not having to meet these special provisions in the laws is that a “nonqualified” plan does not get as many tax breaks as regular pension plans do. These plans are typically used to provide additional or special benefits for highly rewarded employees. Non-Qualified Plans are an option to consider if an employer wants to provide supplementary compensation for key executives or employees and wishes to defer payment into the future. Deferred Compensation Plans / Supplemental Employee Retirement Plans (SERPS) Strategies Golden Parachutes: A golden parachute is an agreement between companies and their key personnel whereby the corporation agrees to pay amounts, often in excess of their usual compensation, to these key employees if there ever is a change in the management control of the corporati
