Proposal Request

Cash Balance Plans, Qualified, and Nonqualified Retirement Plans: Which is Right for Your Business?


Welcome to the INTAC Library. Get the latest news, industry information and insight here.

Cash Balance Plans, Qualified, and Nonqualified Retirement Plans: Which is Right for Your Business?

The small-business owners we serve often have questions about implementing a cash balance plan or nonqualified retirement plan. These are two distinct plans that share a common goal: to accelerate retirement savings.  

Topline differences between cash balance and nonqualified plans

  • A cash balance plan is a qualified retirement plan operating under ERISA (Employee Retirement Income Security Act) guidelines.
    • It generally allows participants to make higher deductible contributions than they can make in a 401(k) plan.
    • It is subject to required contributions and nondiscrimination testing.
    • It helps employers reduce their tax liability.
  • A nonqualified retirement plan does not operate under ERISA guidelines.
    • It is typically offered to highly compensated employees through various plan designs and benefit sources (such as stock, insurance, and bonuses).
    • It allows for higher contributions without required amounts or nondiscrimination testing.
    • It does not provide the tax benefits of a qualified retirement plan.

Employers may find a nonqualified plan’s lack of contribution limits or compliance testing attractive. However, it lacks tax benefits to the employer, a guaranteed benefit, and creditor protection to the employee—all features of a qualified (and cash balance) retirement plan.

Cash Balance Plan

Non-Qualified Plan

Employer Taxation

Immediate tax deductions

No deduction available

Employee Taxation

Benefits are taxed upon cash distribution

Benefits are taxed upon cash distribution


Rollover plan assets without paying taxes

Taxed payouts based on the plan’s terms


Creditor protected

Not protected by creditors

Benefit Limits

Subject to ERISA


Compliance Testing


Not required


Required annual contribution

Contributions not required


Benefits are guaranteed

Benefits are not guaranteed

Your Intac FuturePlan consultant can explain the differences between these plans in greater detail and guide you to the best retirement plan design for your business.