Nonqualified deferred compensation plans (NQDC) are elective plans that allow employees to defer compensation from one tax year to another and entitle them to that compensation. Unlike qualified deferred compensation plans, which are regulated under Section 401(a) of the Internal Revenue Code, nonqualified deferred compensation plans are regulated under IRC Section 409A and are commonly referred to as such.
Gusto does not support adding NQDC plans or deductions to payroll, but we can adjust W-2s as needed at the end of the year. In order to be reported correctly, NQDC plans require plan-specific taxation. Since these plans are highly contractual and taxation is determined based on vesting and risk of forfeiture, make sure to work with your tax professional to determine any taxation adjustments that need to be made.
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