• Unlike 401(k) plans, NQDC plans are not qualified deferred compensation plans and therefore do not afford employees or employers the same tax benefits as qualified plans.

Deferred compensation may include a qualified plan such as a 401(k) plan, or take the form of a nonqualified deferred compensation (NQDC) plan. This is any elective or non-elective plan, agreement, method, or arrangement between an employer and an employee (or service recipient and service provider) to pay the employee compensation sometime in the future. These plans can include voluntary deferral of earned income and/or mandatory deferrals of bonuses, as well as other types of retirement plan vehicles. NQDC plans do not afford employers and employees the tax benefits associated with qualified plans because, unlike qualified plans, NQDC plans do not satisfy all of the requirements of Internal Revenue Code (IRC) Section 401(a).