Non-qualified executive compensation plans allow executives to defer a much larger portion of their compensation, and to defer taxes on the money until the deferral is paid. Most companies provide these plans as an executive retirement benefit, because 401(k) plans often are inadequate for high earners.
Non-qualified executive compensation plans aren’t just for retirement savings. Many plans allow you to schedule distributions during the course of your career, not just when you retire, so you can defer compensation to cover shorter-term goals like paying a child’s college tuition. Plans can also be designed to incentivize employees and create funds to purchase the business.