Participating in an employer-sponsored nonqualified deferred compensation plan is potentially risky because employers are not required to fund nonqualified plans. If the employer is not able to pay the employee when the payment is due, the employee usually becomes an unsecured creditor of the employer.

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Employers are not required to fund nonqualified plans, and if they are unable to pay, employees become unsecured creditors. This makes participating in such plans potentially risky.

Participating in an Employer-Sponsored Nonqualified Deferred Compensation Plan Is Potentially