In addition, nonqualified retirement plan contributions are considered part of the company's assets, so they're not shielded from creditors. If a company goes bankrupt, it may have to draw on the funds in its employees' nonqualified retirement plans to cover debts. Should this happen, the employee won’t get the promised money. It’s a risk employees don’t have to worry about with qualified retirement plans.
Nonqualified plans may also have strict distribution schedules that determine when you can withdraw funds from the account. You usually cannot withdraw funds before an agreed-on date. You're also not eligible to borrow from the plan like you can with some 401(k)s. There’s no way to roll over your nonqualified retirement plan if you decide to leave the company, either.
Nonqualified retirement plans can make sense for executives and certain high-earning employees. But outside of this group, you're unlikely to find them. For the average person, a qualified retirement plan will be a better fit. The qualified plans provide better protections and greater flexibility for moving between jobs.