Qualified vs. Non-Qualified Plans
Chapters in this video
- 0:00 The bankrupt CEO versus the protected janitor
- 1:24 What "qualified" actually means under IRC and ERISA
- 2:44 The discrimination rule and why non-qualified favors executives
- 3:13 Contribution limits: capped versus limitless
- 4:03 The tax deduction timing trap
- 5:03 ERISA trust shield versus general creditor exposure
- 6:47 The Series 7 master cheat sheet
- 7:21 Rapid-fire exam recap
What this video covers
- What makes a plan qualified under the Internal Revenue Code (IRC) and Employee Retirement Income Security Act (ERISA), and why "qualified" does not automatically mean "better"
- Why non-qualified plans can legally discriminate in favor of highly compensated employees, and why that is the entire point of their existence
- The tax deduction timing trap: employers deduct qualified contributions immediately, but non-qualified contributions only when the employee reports the income
- Why qualified plans face strict annual IRC contribution limits while non-qualified plans have none
- How the ERISA trust shield protects qualified plan assets from corporate creditors in bankruptcy
- Why non-qualified plan assets sit in the employer's general account and are fully exposed to creditor claims if the company fails
- The risk-versus-reward tradeoff that explains why a CEO would still choose a non-qualified deferred compensation plan despite the bankruptcy exposure
Read the full lesson, free
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