Qualified vs. Non-Qualified Plans
Chapters in this video
- 0:00 IRC and ERISA as the two bouncers
- 0:48 Carla's qualified fortress: trust and tax-deferred growth
- 3:13 Sam's non-qualified loophole: discrimination and creditor risk
- 4:21 Side-by-side showdown: deduction timing and ERISA coverage
- 5:15 Exam trap: non-qualified does not mean illegal
- 6:10 Rapid-fire exam recap
What this video covers
- Why the Internal Revenue Code (IRC) and Employee Retirement Income Security Act (ERISA) are the two "bouncers" that determine whether a plan earns qualified status
- How qualified plans require IRS approval, must be non-discriminatory, and face annual contribution limits
- Why qualified plan assets held in trust are creditor-proof in bankruptcy, while non-qualified assets are exposed
- When an employer takes the tax deduction: immediately upon contribution for qualified plans, only at distribution for non-qualified plans
- Why non-qualified plans can discriminate by design to selectively reward highly compensated executives
- How non-qualified plan assets sit in the employer's general assets, making them vulnerable to creditor claims
- The exam trap of confusing "non-qualified" with illegal or inferior, when it is a deliberate legal structure
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