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Nonqualified Plans

Qualified retirement plans, such as 401(k) plans, limit how much employees can save for retirement. This often creates a retirement savings gap for highly compensated employees. A nonqualified plan can help bridge that gap by providing an additional way for these employees to save.

The Principal is among the leading providers of nonqualified deferred compensation plans[1]. We provide administrative services for nearly 4,700 nonqualified plans, representing over 4,200 clients and over 65,000 participants.[2]

Employee Benefits

Some of the benefits of a nonqualified plan for employees include:

  • Option to make contributions on a pre- or post-tax basis
  • Tax-deferred earnings
  • No contribution limit
  • No minimum withdrawal requirement at age 70 1/2

Employer Benefits

Nonqualified plans have many features that are attractive to employers:

  • No contribution or participation limits
  • Discretionary matching or incentive profit sharing contributions
  • Simplified government reporting and disclosure rules
  • Certain tax advantages or financial benefits can apply
  • Ability to recover plan costs


To offer a viable nonqualified plan, businesses generally need to meet the following criteria:

  • Public, Private C Corporation, or Tax-Exempt business entity
  • Substantial business continuity
  • Financial integrity
  • Highly compensated employees (approximately $115,000 or more per year)


Some additional factors to consider about offering a nonqualified plan include:

  • Employer tax deductions on contributions to the plan are deferred until a distribution is made to a plan participant
  • Testing and auditing are not required
  • The employer has the option to leave the plan unfinanced, or to finance through taxable investments or corporate owned life insurance
  • The employer will incur plan-level administrative fees
  • The employer will need to communicate the plan to employees

How The Principal can help

Our seamless plan integration and ongoing administrative services take the hassle out of maintaining this executive benefit for your organization. We help you and your key employees make the most of the plan by:

  • Ensuring your nonqualified plan solutions meet your legal, accounting and financial needs
  • Providing enrollment and education tools
  • Making plan administration simpler and more effective through a dedicated service team, online access to information, specialized reporting and more



Based on total number of NQDC plans, 2014 PLANSPONSOR NQDC Buyer's Guide
As of 12/31/2014


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For more information

Learn more about retirement plans;
visit The Principal Blog.

Have a question? Call us at 1.800.986.3343

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