Primerica Life Producer Practice Test

Which statement regarding employer-sponsored nonqualified retirement plans is not true?

1. The employer can receive a current deduction for any contributions

2. Employees have fixed contribution amounts

3. Contributions may be paid from taxable income

4. The plans are not subject to minimum distribution requirements

The correct answer is: The employer can receive a current deduction for any contributions

The statement about employer-sponsored nonqualified retirement plans that is not true is that the employer can receive a current deduction for any contributions. This is important to understand because nonqualified plans do not provide the same tax advantages as qualified plans. In nonqualified plans, the employer cannot take a current deduction for contributions made to the plan. Instead, the expenses related to such contributions can often be deducted only when the benefits are paid out to the employee. This distinction highlights the tax treatment differences between qualified and nonqualified plans. The other statements are true: employees typically do not have fixed contribution amounts in nonqualified plans, as these plans allow more flexibility in the contributions made. Contributions to these plans may indeed be made from taxable income, meaning they are not made with pre-tax dollars like qualified plans. Additionally, nonqualified plans are not subject to the minimum distribution requirements that apply to qualified plans, providing further flexibility. Understanding these nuances helps clarify the overall functioning and strategic use of nonqualified retirement plans.