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The non-qualified plan on a W-2 is a type of retirement savings plan that is employer-sponsored and tax-deferred. They are non-qualified because they fall outside the Employee Retirement Income Security Act (ERISA) guidelines and are exempt from the testing required with qualified retirement savings plans.

If your IRA is funded by before-tax money, meaning that you claimed a deduction from your income for your contributions, any amount you withdraw before you reach age 59 1/2 is a non-qualified withdrawal, and it's subject to penalties.

A qualified retirement plan is a retirement plan established by an employer that is designed to provide retirement income to designated employees and their beneficiaries, which meets certain IRS Code requirements in terms of both form and operation.

The benefits in most traditional defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC). A defined contribution plan, on the other hand, does not promise a specific amount of benefits at retirement.

401(k) Contribution Limits for Highly Compensated Employees Including both employee and employer contributions, the total limit for 2023 is $66,000, or $73,500 if there are catch-up contributions. For 2022, a 401(k) participant filing single could make up to $20,500 in contributions.

1. Is a 401(k) Plan Qualified or Nonqualified? A 401(k) plan is considered a qualified retirement plan. If your company offers employees a 401(k), you may get a tax break by contributing a percentage on your employees' behalf.

Proof of plan qualification status is typically documented in a copy of the plan's IRS Letter of Determination, a signed letter from your employer or prior Plan Administrator and/or your rollover distribution statement. Proof of taxability is typically documented in your rollover distribution statement.