Employers generally are concerned with employee retention and performance motivation as important factors in achieving the company's goals. These factors may be especially critical at the executive level, where turnover could be very disruptive to the continuity of operations.

In an effort to retain key employees, an employer can provide performance incentives and retirement benefits to employees through qualified plans. Qualified plans, however, cannot be offered only to select employees since they must comply with nondiscrimination rules in order to maintain their tax-favored status. Nonqualified plans, because they do not receive the favorable tax treatment of qualified plans, are not subject to the nondiscrimination requirements of the Internal Revenue Code and therefore can be offered to employees on a discriminatory basis.

About the Authors

Kristen MacKenzie, MBA, CFP®, CRPC® is an associate professor at the College for Financial Planning. Kristen has over 20 years of experience in the financial services industry, both as an active financial planner and as a provider of financial education. She graduated from the University of Connecticut with a degree in economics and later received her MBA at the University of Colorado.

Michael Angell, CFP®, EA is an associate professor at the College for Financial Planning. He obtained his bachelor's degree in mathematics at Creighton University. His 20+ years of work experience includes banking, insurance, investments, retirement, and estate planning. In addition to his responsibilities at the College, Michael also serves as a private client services advisor with an independent investment firm and is also a federally licensed tax practitioner with a nationally recognized company. You can contact him at Michael.Angell@cffp.edu.

Complexity Level: Advanced