A Nonqualified Deferred Compensation Plan is an arrangement where the employer can provide extra benefits to a select group of key employees over and above the limitations on qualified plans. These plans can discriminate in favor of key people, with different plans for different employees. They can provide “golden handcuffs” on the key employees by means of delayed vesting schedules. While employer contributions to a plan are not currently tax deductible, the employer can deduct the amounts when paid to the executives or their beneficiaries. Life insurance can be used to provide cost recovery to the employer.