Non-Qualified Deferred Compensation (NQDC) plans enable an executive to defer salary, bonus pay and other types of compensation into a self-directed investment trust. Funds in the trust can grow, tax-deferred, until withdrawn.
Nonqualified plans are a key component of retirement packages for highly compensated executives. But, says Alexandra Taussig, senior vice president at Fidelity Investments, “many people don't understand nonqualified plans, and they're not using them. These plans are a great retirement vehicle for hospital executives and physicians after they've maxed out their qualified plans.”
NQDC plans enable high earners to set aside larger amounts for retirement than they can with a traditional 401(k) plan. But, unlike a 401(k), you can't borrow from an NQDC.
In addition to nonqualified plans, Taussig recommends healthcare execs take a holistic view of their overall benefits. “This is what I call total benefits optimization — helping executives make sure they're optimizing all of their benefits.”