Is there such a thing as a non-qualified retirement plan? Yes. A non-qualified plan is an employee benefit plan that has its own set of rules and does not comply with the Internal Revenue Code regulations covering qualified retirement plans, and is therefore not eligible for the same tax benefits enjoyed by qualified retirement plans.

Two common types of non-qualified plans are the executive bonus plan and deferred compensation plan. Both are generally used by employers for their personal benefits or to attract, motivate and retain key employees.

The chief advantage associated with a non-qualified retirement plan is that employers are not bound to the strict nondiscrimination, participation and compliance requirements that apply to qualified retirement plans. For example, with a non-qualified plan, an employer can include certain Highly Compensated Employees, while excluding all other employees. The notable disadvantage of a non-qualified plan is that employer contributions to a non-qualified plan are not deductible.

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