Employer-sponsored defined contribution plans are popular benefits that provide employees with a tax-advantaged way to build retirement savings. Qualified programs — such as 401(k) plans — offer pre-tax deferral opportunities but have government-imposed limits and restrictions. Nonqualified Deferred Compensation Plans (NQDC) enable select participants to defer substantially more of their income in exchange for assuming additional risk, and are a powerful tool employers use to recruit, retain and reward top talent. Both types of plans are highly valued among employees preparing for a financially secure future, but operate differently.

Key Elements of a NQDC Plan