Series 65: Non-Qualified Retirement Plans

Taken from our Series 65 Online Guide

Non-Qualified Retirement Plans

Non-qualified retirement plans do not meet the qualifications necessary to receive favorable tax treatment. For corporations, this may mean they did not meet the ERISA requirements. Non-qualified plans are often used to give special retirement benefits to key employees. The contributions to non-qualified plans are usually made with after-tax dollars, and because taxes have already been paid on these contributions, any withdrawals of contributions are not taxed. When earnings are withdrawn, however, they are taxed at the participant’s ordinary income level. Non-qualified plans do not allow employers to deduct contributions from their income for tax purposes.

Employers often choose to establish non-qualified plans, because they do not have to make them available to every employee, so they offer more flexibility than qualified plans. Other advantages to non-qualified plans are that they are easy to set up, they require almost no filing, and the

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