Chartered Retirement Planning Counselor (CRPC) Practice Exam 2026 – Comprehensive All-in-One Guide for Exam Success!

The top hat plan is a type of nonqualified deferred compensation plan that is designed specifically to provide additional benefits to a select group of management or highly compensated employees. One of its key features is its ability to help participants make up for the limits imposed on contributions and benefits in qualified retirement plans, such as 401(k) plans or pension plans.

Due to these limitations in qualified plans, high earners may find that their contribution levels fall short of their desired retirement savings. The top hat plan allows them to defer additional compensation, thus enabling them to receive total benefits closer to what they would expect without the restrictions of qualified plans. This makes it an effective tool for providing "make whole" benefits to participants who have been financially disadvantaged due to these caps.

In contrast, while other nonqualified deferred compensation plans could also provide some relief, a top hat plan is particularly focused on highly compensated employees and doesn't require the same level of regulatory compliance as qualified plans, giving it operational flexibility to accomplish its goals more effectively.