Informally funded with corporate-owned life insurance, Nonqualified Deferred Compensation (NQDC) plans permit key employees to set aside money over and above qualified retirement plan limits and are not required to meet the stringent qualified plan nondiscrimination rules. In other words, it enables you to provide a retirement plan for yourself and other key employees without including rank-and-file employees in the plan.
There are several types of NQDC plans:
Traditional deferred compensation
The employee elects to receive future compensation, funded from a current salary reduction, or deferral, of a current bonus or salary increase.
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