Nonqualified deferred compensation (NQDC) is an arrangement between an employer and employee that defers the receipt of currently earned compensation. A NQDC plan does not have to comply with the discrimination and administrative rules that govern qualified benefit plans, such as Section 401 of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA).
A pension plan that fails to meet or was not intended to meet the qualifications set forth in Section 401(a) of the Internal Revenue Code of 1954.
A contractual arrangement that calls for paying an individual or group of executives future benefits. It does not qualify for favorable tax treatment, but has far fewer restrictions than qualified plans. Non-qualified plans are unsecured and subject to risks; they must remain "unfunded" to avoid current taxation.