Nonqualified plans for highly paid employees

Correct Answer: They are unsecured obligations of the employer.

Nonqualified deferred compensation plans are unsecured obligations of the employer, meaning they rely on the employer's ability to pay the promised benefits. This makes them riskier for employees compared to qualified plans. The other options are incorrect because these plans are not held in separate trust accounts, they are not insured by the Pension Benefit Guaranty Corporation (PBGC), and they are not typically partially funded through pre-funded trusts.

Correct Answer: They are typically unfunded, relying on the employer's promise to pay benefits in the future.

They are typically unfunded, relying on the employer's promise to pay benefits in the future. Nonqualified deferred compensation plans for highly paid employees are generally unfunded, meaning they do not have separate assets set aside to pay the promised benefits. Instead, these plans depend on the employer's commitment to provide the deferred compensation from its general assets in the future. The other statements are incorrect because: - These plans are not required to be fully funded through secured insurance contracts. - They do not have to adhere to immediate vesting schedules upon employee enrollment. - They are not subject to the strict contribution limits that apply to qualified retirement plans.

Correct Answer: Nonqualified plans typically have higher contribution limits than qualified plans.

Nonqualified plans typically have higher contribution limits than qualified plans. This is because nonqualified plans are designed to provide additional benefits to highly compensated employees without being subject to the same statutory limits as qualified plans. In contrast, qualified retirement plans have set contribution limits imposed by the IRS to ensure they meet specific regulatory requirements for tax benefits.