A pension funded by an employer is a Qualified plan.
Qualified deferred compensation plans have a limit.
For example, employees can only defer up to $23,000 to their traditional 401(k) plan in 2024.
Other examples of qualified plans include:
- Profit-sharing plans.
- 403(b) plans.
- 457 plans.
- Money purchase plans.
- Employee stock ownership plans (ESOPs)
- Salary Reduction Simplified Employee Pension (SARSEP) plans.
- Simplified Employee Pension (SEP) plans.
- Savings Incentive Match Plan for Employees (SIMPLE) plans.
Nonqualified deferred compensation plans have no limit.
Employees can defer as much of their compensation as they would like.
Nonqualified retirement plans are savings vehicles that are not subject to the rules of the Employee Retirement Income Security Act (ERISA).
There are four major types of nonqualified plans:
- Deferred-compensation plans.
- Executive bonus plans.
- Split-dollar life insurance plans.
- Group carve-out plans.
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