Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

The correct answer is that the employer receives a deduction when benefits are taxable income. This principle reflects the nature of non-qualified plans, which are typically not subject to the same tax rules as qualified plans. In the case of non-qualified plans, contributions made by the employer do not provide an immediate tax deduction. Instead, the employer can claim a tax deduction when the benefits are eventually paid out to the employee and these benefits become taxable income.

Understanding this mechanism is crucial, as it aligns the employer's tax deduction with the employee's recognition of income, ensuring that the tax consequences are matched appropriately. This delayed deduction can be beneficial for employers, allowing them to manage their cash flow better while still providing employee benefits.

In summary, it's essential for employers to be aware that while they won't receive a tax deduction at the time of contribution, they can realize those deductions when the benefits are ultimately taxed, which aids in planning their financial responsibilities.