Nonqualified deferred compensation plans – Is your arrangement due for an update?
Abstract: Nonqualified deferred compensation (NQDC) plans can help lure or retain a top-producing manager, but also put a substantial strain on a construction company’s finances. Furthermore, they can have an impact on a company’s long-term business strategy and succession plan. This article discusses four different categories of NQDC plans and the tax and cash flow implications of funded vs. unfunded plans. NQDC plans are complicated and the slightest of errors can have big consequences, so a sidebar discusses what the IRS looks for when performing an NQDC plan audit.