Now that tax rates have increased for high earners, have nonqualified deferred compensation (NQDC) arrangements once more become a valuable tool? This article looks at whether these changes have made nonqualified deferred compensation plans more attractive. It also examines how certain features of NQDC plan design can cause you tax problems.

In nonqualified deferred compensation plans, the fourth quarter of the year is the most common period in which salary deferrals are elected for the year ahead. This year, you must adjust to new tax rates, including the Medicare surtax on investment gains. Issues to consider in your decision-making at enrollment include the following…