The four major types of nonqualified plans, according to Investopedia.com, are:
- Deferred compensation plans
- Executive bonus plans
- Group carve-out plans
- Split-dollar life-insurance plans
Nonqualified deferred compensation plans are not funded by the employer and therefore, participants are considered general creditors of the company. This lack of a guarantee that the deferred compensation plan will be paid is one of the biggest drawbacks of these plans, according to Fidelity’s LifeDesign Financial Answer Center.