Legal Definitions - nonqualified pension plan

A nonqualified pension plan is a type of deferred-compensation plan that allows executives to increase their retirement benefits by making additional contributions to the company's basic plan. This plan is not subject to the same federal laws as qualified pension plans, such as the Employee Retirement Income Security Act (ERISA), and does not offer the same tax benefits.

For example, a CEO may have a nonqualified pension plan that allows them to contribute an additional $50,000 per year to their retirement benefits. This plan is not available to all employees and is only offered to a select group of executives.

Nonqualified pension plans are often used as a way to attract and retain top talent in a company. However, they are not as secure as qualified pension plans and may be at risk if the company experiences financial difficulties.