What is a nonqualified deferred compensation plan?
A nonqualified deferred compensation plan is a contractual agreement between an employee and his or her employer. Under this contract, which is the plan document, the employer makes a promise to pay income benefits to the employee at some later date, subject to a number of requirements and other provisions of the document. The plan may be merely a promise on the part of the employer (an unfunded plan), or the promise may be secured by assets set aside in the employee s name (a funded plan) and protected from the company s creditors.