Qualified Plans/Non-qualified Plans
The Dictionary of Insurance Terms and Definitions
“Qualified” and “non-qualified” refer to whether a particular retirement plan qualifies for tax-advantaged status.
Life insurance is already tax-advantaged, but financial plans which employ life insurance as a vehicle are generally denoted non-qualified because the financial plan itself carries no tax advantages of its own.
For example, a split-dollar arrangement is a financial plan which details how a life insurance policy will be paid for. The life insurance policy carries its own tax advantages, but using a split-dollar arrangement adds no further tax advantages. Therefore, a split-dollar arrangement is non-qualified.
Even a non-qualified plan can be used to reduce taxes, however. For example, a deferred compensation plan can reduce (not just postpone) income taxes due.
The benefit of a non-qualified plan is that it does not need to adhere to additional IRS regulations in order to maintain its status.
