Non-Qualified Deferred Compensation

Non-qualified deferred compensation (NQDC) is a financial arrangement where an employee agrees to delay receiving part of their salary or bonuses until a future date, often for tax or retirement planning reasons. Unlike qualified plans (like pensions or 401(k)s), NQDC plans are not protected by strict government rules, so the money isn’t insured and can be more risky if the company faces financial trouble. Participants typically benefit from potential tax advantages since taxes are paid when the money is received, not when it’s earned. These plans are often offered to executives or highly compensated employees.