Nonqualified Deferred Compensation Plans

Nonqualified Deferred Compensation (NQDC) Plans are arrangements that allow employees to postpone receiving part of their salary or bonuses until a later date, usually retirement or a specific event. These plans aren't protected by the same laws as qualified plans like 401(k)s, meaning the deferred money is at higher risk if the employer faces financial trouble. They are often used by executives to supplement retirement savings, offering potential tax advantages. Essentially, NQDC plans help employees save and plan for future income in a flexible way, beyond standard retirement plans, but with certain risks and less regulatory protection.