A nonqualified deferred compensation (NQDC) plan is an agreement between you and your employer to pay some portion of your compensation in the future. NQDC plans provide employers and employees with different tax benefits than qualified plans, such as 401(k)s and defined contribution plans. Under a nonqualified plan, your employer agrees to pay you some type of compensation at a future time. It may be dependent on you completing certain requirements — such as years of service or honoring the terms of a noncompetition agreement — or it may simply be an agreement to pay some of your current salary at a future time. The advantage to you is that you are not taxed on the income until you actually receive it. The disadvantage is that you will have a very low priority behind most of your employer’s creditors in the event your employer cannot pay its debts. Types of deferred compensation plans NQDC plans typically fall into four categories: