diff --git a/core/lib/Drupal/Core/Entity/EntityReferenceSelection/SelectionPluginBase.php b/core/lib/Drupal/Core/Entity/EntityReferenceSelection/SelectionPluginBase.php
index 8635755..1f5a4c2 100644
--- a/core/lib/Drupal/Core/Entity/EntityReferenceSelection/SelectionPluginBase.php
+++ b/core/lib/Drupal/Core/Entity/EntityReferenceSelection/SelectionPluginBase.php
@@ -3,7 +3,6 @@
 namespace Drupal\Core\Entity\EntityReferenceSelection;
 
 use Drupal\Component\Plugin\ConfigurablePluginInterface;
-use Drupal\Component\Utility\NestedArray;
 use Drupal\Core\Database\Query\SelectInterface;
 use Drupal\Core\Form\FormStateInterface;
 use Drupal\Core\Plugin\PluginBase;
@@ -55,17 +54,13 @@ public function getConfiguration() {
    * {@inheritdoc}
    */
   public function setConfiguration(array $configuration) {
-    // Merge defaults.
-    $this->configuration = NestedArray::mergeDeep(
-      $this->defaultConfiguration(),
-      $configuration
-    );
 
     // In order to keep backward compatibility, we copy all settings, except
     // 'target_type', 'handler' and 'entity' under 'handler_settings', following
     // the structure from the field config. If the plugin was instantiated using
-    // the 'handler_settings' level, then those values will take precedence. The
-    // backward compatibility aware configuration will have the next structure:
+    // the 'handler_settings' level, those values will be used. In case of
+    // conflict, the root level settings will take precedence. The backward
+    // compatibility aware configuration will have the next structure:
     // - target_type
     // - handler (will be removed in Drupal 9.0.x, it's the plugin id)
     // - entity
@@ -79,13 +74,25 @@ public function setConfiguration(array $configuration) {
     //     ...
     //   - setting_N
     // @todo Remove 'handler' and 'handler_settings' in Drupal 9.0.x.
-    if (array_key_exists('handler_settings', $this->configuration) && is_array($this->configuration['handler_settings'])) {
-      $this->configuration = $this->configuration['handler_settings'] + $this->configuration;
+
+    $default_config = $this->defaultConfiguration();
+    if (isset($default_config['handler_settings'])) {
+      throw new \InvalidArgumentException("{$this->getPluginDefinition()['class']}::defaultConfiguration() should not contain a 'handler_settings' key. All settings should be placed in the root level.");
     }
-    // Sync back 'handler_settings'.
+
+    // Extract the backward compatibility level from passed configuration, if any.
+    $handler_settings = !empty($configuration['handler_settings']) ? $configuration['handler_settings'] : [];
+    unset($configuration['handler_settings']);
+
+    // Merge in BC layer and defaults. Settings passed in the root level take
+    // precedence over BC settings.
+    $this->configuration = $configuration + $handler_settings + $default_config;
+
+    // Synchronize back 'handler_settings'.
+    // @todo Remove this sync in Drupal 9.0.x
     foreach ($this->configuration as $key => $value) {
       // Filter out keys that belong strictly to the root level.
-      if (!in_array($key, ['handler', 'target_type', 'entity'])) {
+      if (!in_array($key, ['handler', 'target_type', 'entity', 'handler_settings'])) {
         $this->configuration['handler_settings'][$key] = $value;
       }
     }
diff --git a/core/tests/Drupal/Tests/Core/EntityReferenceSelection/EntityReferenceSelectionUnitTest.php b/core/tests/Drupal/Tests/Core/EntityReferenceSelection/EntityReferenceSelectionUnitTest.php
index 9e14ff9..f4ec44e 100644
--- a/core/tests/Drupal/Tests/Core/EntityReferenceSelection/EntityReferenceSelectionUnitTest.php
+++ b/core/tests/Drupal/Tests/Core/EntityReferenceSelection/EntityReferenceSelectionUnitTest.php
@@ -15,6 +15,17 @@
 class EntityReferenceSelectionUnitTest extends UnitTestCase {
 
   /**
+   * Tests invalid default configuration.
+   *
+   * @covers ::defaultConfiguration
+   * @expectedException \InvalidArgumentException
+   */
+  public function testInvalidDefaultConfiguration() {
+    (new TestSelectionWithInvalidDefaultConfiguration([], 'test_selector', ['class' => 'TestSelectionWithInvalidDefaultConfiguration']))
+      ->getConfiguration();
+  }
+
+  /**
    * Provides test data for ::testSetConfiguration()
    *
    * @return array
@@ -48,10 +59,10 @@ public function providerTestSetConfiguration() {
       [
         [
           'setting1' => 'foo',
-          'setting2' => 'this will be overwritten',
+          'setting2' => ['bar', 'baz'],
           'handler_settings' => [
-            // Settings under 'handler_settings' take precedence.
-            'setting2' => ['bar', 'baz'],
+            // Same setting from root level takes precedence.
+            'setting2' => 'this will be overwritten',
           ]
         ],
       ],
@@ -76,22 +87,55 @@ public function testSetConfiguration($options) {
       'handler' => 'test_selector',
       'entity' => NULL,
       'setting1' => 'foo',
-      'setting2' => [
-        'bar',
-        'baz',
+      'setting2' => ['bar', 'baz'],
+      'setting3' => 'foobar',
+      'handler_settings' => [
+        'setting1' => 'foo',
+        'setting2' => ['bar', 'baz'],
+        'setting3' => 'foobar',
       ],
+    ];
+
+    $this->assertArrayEquals($expected, $selection->getConfiguration());
+  }
+
+  /**
+   * Tests the selection handler plugin BC structure.
+   *
+   * @covers ::setConfiguration
+   */
+  public function testSetConfigurationBcLevel() {
+    $config = [
+      'target_type' => 'some_entity_type_id',
+      'handler' => 'test_selector',
+      'setting1' => 'foo',
+    ];
+    $selection = new TestSelection($config, 'test_selector', []);
+
+    $expected = [
+      'target_type' => 'some_entity_type_id',
+      'handler' => 'test_selector',
+      'entity' => NULL,
+      'setting1' => 'foo',
+      'setting2' => ['qux'],
+      'setting3' => 'foobar',
       'handler_settings' => [
         'setting1' => 'foo',
-        'setting2' => [
-          'bar',
-          'baz',
-        ],
-      ]
+        'setting2' => ['qux'],
+        'setting3' => 'foobar',
+      ],
     ];
 
+    $this->assertArrayEquals($expected, $selection->getConfiguration());
+
+    // Read the stored values and override a setting.
     $config = $selection->getConfiguration();
-    // Sort by keys to get make comparision possible.
-    $this->assertSame(ksort($expected), ksort($config));
+    $config['setting1'] = 'bar';
+    $selection->setConfiguration($config);
+    $expected['setting1'] = 'bar';
+    $expected['handler_settings']['setting1'] = 'bar';
+
+    $this->assertArrayEquals($expected, $selection->getConfiguration());
   }
 
 }
@@ -101,6 +145,13 @@ public function testSetConfiguration($options) {
  */
 class TestSelection extends SelectionPluginBase {
 
+  public function defaultConfiguration() {
+    return [
+      'setting2' => ['qux'],
+      'setting3' => 'foobar',
+    ] + parent::defaultConfiguration();
+  }
+
   public function getReferenceableEntities($match = NULL, $match_operator = 'CONTAINS', $limit = 0) { }
 
   public function validateReferenceableEntities(array $ids) { }
@@ -108,3 +159,16 @@ public function validateReferenceableEntities(array $ids) { }
   public function countReferenceableEntities($match = NULL, $match_operator = 'CONTAINS') { }
 
 }
+
+/**
+ * Provides a testing plugin with invalid default configuration.
+ */
+class TestSelectionWithInvalidDefaultConfiguration extends TestSelection {
+
+  public function defaultConfiguration() {
+    return [
+      'handler_settings' => ['foo' => 'bar'],
+    ];
+  }
+
+}