Nonqualified deferred compensation (NQDC) plans have been around since the legendary boxer Sugar Ray Robinson signed a deal with the International Boxing Club of New York in 1957. And yet this popular compensation planning tool is still misunderstood.
Some think it’s merely an extension to 401(k) plans, and others think it’s only a tool for rich, C-suite pinstripers on Wall Street.
For a few readers, this may even be the first time you’ve heard of such a plan. In short, nonqualified deferred comp allows an employee to save beyond government “qualified” limits such as those in a 401(k) plan ($18,000 for 2016). Hence the “nonqualified” term..