Nonqualified Deferred Compensation (NQDC) Plans for Employees

Extra savings beyond qualified plan limits

Nonqualified deferred compensation plans (deferred compensation plans) allow key employees to contribute additional tax-deferred compensation (up to 100%, depending on plan design) to their savings—and allow employers to make discretionary contributions as well.

Deferred comp plans can play an important role in retirement. Studies from Principal®, the No. 1 provider of NQDC plans1, show that 85% of plan participants consider a deferred comp plan most important in reaching financial retirement goals.2

Talk to your advisor about incorporating—or improving—a deferred comp plan in your benefits program.

Help employees close the gap

With qualified contribution limits, highly compensated employees often fall short of the recommended savings goal of 80 to 85% of pre-retirement income. Nonqualified deferred comp plans give them an easy way to contribute more and eliminate the gap.

Is a nonqualified deferred compensation plan right for your organization?

To offer a viable nonqualified plan, your business should meet certain criteria:

  • Public, Private C Corporation, Pass-through tax entity (for non-owners), or non-governmental tax-exempt business entity
  • Substantial business continuity and financial integrity
  • Highly compensated employees with a retirement gap due to qualified plan limitations

Make the most of your current deferred compensation plan

Improving your existing deferred comp plan could sweeten your benefits package for top talent and give you:

  • Simplified government reporting and disclosure rules
  • Discretionary matching or incentive profit-sharing contribution options
  • Certain tax advantages and financial benefits, depending on plan structure

Principal® can evaluate your existing plan’s financing approach, plan design, and administrative services—and give you the opportunity to combine all your retirement plans into one tailored solution with the Principal Total Retirement SuiteSM.

Get more details

Learn more about the benefits of a nonqualified retirement plan from Principal.

Do you offer employee benefits through us?

Manage your benefits online.

Learn more

Call us at 800-952-3343 ext. 22681 to discuss whether a nonqualified retirement plan fits into your employee benefits package.

See what these employers have to say about the benefits of deferred comp plans:

1 Based on total number of Section PLANSPONSOR 2018 NQDC Recordkeeping Survey, June 2018.

2 The 2018 Principal Trends in Nonqualified Deferred Compensation report is an online survey of 1,324 NQDC plan participants conducted
between June 25 and July 23, 2018.