Unlike a 401(k), NQDC deferrals aren’t protected by ERISA — they remain a general unsecured claim against the employer, with no dollar contribution limit but real bankruptcy risk.
How it works
Each year’s deferral compounds separately at the plan’s crediting rate, from its own deferral date forward to the distribution date — an earlier deferral compounds for more years than a later one.
What this does not include
Distribution timing under a real NQDC plan must be fixed in advance under IRC §409A, with substantial penalties for impermissible changes — this calculator projects the account’s growth, not §409A compliance itself.
How to use this calculator
- Enter amounts deferred in year 1 and year 2, the plan’s crediting rate, and years until distribution.
Frequently asked questions
Is NQDC as safe as a 401(k)?
No — 401(k) assets are held in trust for employees and protected from the employer’s creditors; NQDC deferrals remain part of the employer’s general assets, at risk if the employer becomes insolvent.
Can I access NQDC funds early if I need cash?
Generally no — distribution timing must be elected in advance and changing it is heavily restricted under §409A, with steep penalties for non-compliant early access.
Why would anyone use NQDC given the risk?
It allows deferring compensation (and the associated tax) beyond what qualified plans permit, valuable for highly compensated employees who’ve maxed out 401(k) and other qualified plan limits.
