Non-Qualified Deferred Compensation

Non-qualified deferred compensation plans are designed to provide incentive and reward key employees and are not governed by the special tax rules for ‘qualified’ plans, such as 401 (k) and other profit-sharing arrangements. Unlike qualified plans, which are deductible to the company when funded, but only taxed to the participant at withdrawal, non-qualified plan payments are not deductible to the company until funds are actually paid to the participants. Their non-qualified nature, however, allows much more flexibility in participant selection, vesting schedules and forfeiture rules.