Qualified vs. Non-Qualified Plans Under the TCJA

Qualified vs. Non-Qualified Plans Under the TCJA

The Tax Cuts and Jobs Act of 2017 (TCJA) will bring substantial changes to all areas of federal taxation, including the new qualified business income deduction rule contained in the new IRC section 199A. As a result, qualified and non-qualified retirement and pensions will be impacted.

As you may know, the IRS designates certain retirement and pensions plans as “qualified” and “non-qualified.” In the past, qualified pensions and retirement funds have been the more popular vehicle for savings over non-qualified plans in America.

Popular qualified plans may include:

  • 401(k)s
  • 403(b)s
  • SEP Plans
  • Defined Benefit Plans

 

A retirement or pension plan is considered “qualified” if it meets the federal standards promulgated by the Employee Retirement Income Security (ERISA).

Non-qualified plans, on the other hand, do not meet the ERISA requirements. For this reason, non-qualified funds offer more flexibility for employers but also limit the tax benefits. However, under the TCJA, there are new methods in which business owners and employers may further mitigate their tax burden using a non-qualified plan.

These strategies may include:

  • Deferred Compensation Plans
  • Split Dollar
  • Premier Bonus Plans

 

These opportunities have become available because, under the TCJA, business owners may be taxed at a lower rate:

Qualified vs. Non-Qualified Plans Under the TCJA

Contact us to speak with our non-qualified benefit specialist and find out more!

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