Successful employers have constantly sought innovative ways to retain and reward key employees. A Non-Qualified plan allows an employer the flexibility needed to provide a benefit showing a commitment to the key employees of an organization and also provides an incentive that reduces turnover at critical management levels.
There are a number of types of non-qualified plans, including deferred-compensation plans, bonus deferral plans, excess benefit plans, and supplemental executive retirement plans. The contributions made to these plans are usually nondeductible to the employer and taxable to the employee. However, they allow employees to defer taxes until retirement — when they are presumably in a lower tax bracket.