Nonqualified Deferred Compensation (NQDC)

Nonqualified Deferred Compensation (NQDC) is a financial arrangement where an employer allows employees to voluntarily defer a portion of their salary or bonuses to a future date, usually for tax benefits or retirement plans. Unlike qualified plans (like 401(k)s), NQDC plans are not subject to the same strict regulations and limits. This means they can be more flexible, but they also come with risks, as they are not guaranteed and could be lost if the company faces financial issues. Employees pay taxes on the deferred amounts when they are eventually received, typically during retirement.