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Nonqualified Deferred Compensation Plans 

Amplify your benefits offering with nonqualified deferred compensation (NQDC) plans, enhance workplace benefits and support strategic initiatives.

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Are You Ready to Elevate Your Benefits Strategy? 

Are You Ready to Elevate Your Benefits Strategy? 

Are you worried that your current retirement plan isn’t ‘moving the needle’ to keep your key employees engaged? 

Putting together a ‘golden handcuff’ plan could be the missing piece to attracting and retaining the talent you want.

Our team has the experience and qualifications to help you set up nonqualified supplemental plans. We have professionals Nonqualified Plan Consultant NQPC™, with experience to help you create and effectively run Deferred-Compensation Plans, Executive Bonus Plans, Group Carve-Out Plans, Split-Dollar Life Insurance Plans, and Cash Balance Plans.

 

What is a Nonqualified Deferred Compensation Plan?

A NQDC plan is a special agreement between a company and a participant, often an executive or highly compensated individual. Through this plan, participants can defer a portion of their current compensation and related income taxes, with the employer also contributing to the account.

When participants receive the compensation as a future benefit payment, they pay the related income taxes at that time. FICA taxes (Social Security and Medicare) are typically paid when the deferral occurs (for employee deferrals) or at vesting (for employer contributions). Additionally, the deferred compensation grows tax-deferred through notional investments during the deferral period.

Types of NQDC Plan Deferrals

  • Voluntary salary and bonus deferrals
  • Stock plan deferrals (e.g., Restricted Stock Units)
  • Employer matching, nonelective, and profit-sharing contributions
  • Employer discretionary contributions
  • Other deferrals (e.g., commissions, board compensation)
  • Benefits of NQDC Plans for Businesses and Employees

By offering NQDC plans, you can:

  • Attract, retain, and reward highly compensated and executive talent.
  • Provide flexibility beyond the limits of qualified plans like the 401(k).
  • Allow penalty-free distributions for various life goals beyond retirement, such as buying a vacation home or funding education.
  • Offer potential tax benefits and tax-deferred growth for participants.
  • Address nondiscrimination testing issues in qualified plans.
  • Extend plan eligibility to nonemployees like independent contractors or board members.
  • Benefit from flexible financing solutions as NQDC plans are deemed "unfunded" for tax purposes.


Ready to Take the Next Step?

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Discover how a Nonqualified Deferred Compensation Plan can elevate your benefits offerings and support your business goals.
Schedule a free consultation to learn more.

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