There are two major categories of pension plans: qualified plans and nonqualified plans.
Qualified plans meet the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code and qualify for four significant tax benefits.
Nonqualified plans are those not meeting the ERISA guidelines and the requirement of the Internal Revenue Code. They cannot avail themselves of the preferential tax treatment. Nonqualified plans are usually designed to provide deferred compensation exclusively for one or more executives.
Retirement plans are also divisible into the following broad categories: