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QDROphile is right that a nonqualified deferred compensation plan is not governed by or subject to the same ERISA and Internal Revenue Code rules and conditions that usually apply to an IRC § 401-qualified plan. But if the deferred compensation is provided by a plan established or maintained by an employer (and is not a governmental plan or a church plan), the plan might be governed by title I of the Employee Retirement Income Security Act of 1974. If so, the exceptions that ERISA sections 201, 301, and 401 provide for an unfunded select-group plan excuse such a plan only from Parts 2, 3, and 4 of subtitle B of title I of ERISA, and do not excuse a plan from Parts 1 and 5. Alternatively, an agreement with an employee – especially if just one has deferred compensation – could be so lacking in a need for administration that it might not be a plan (within the meaning of ERISA § 3(2)(A)). Whether ERISA or State law governs, a deferred compensation agreement might include an implied obligation of good faith and fair dealing. So Lou S.’s suggestion about getting a lawyer’s advice makes sense not only to get a clear picture of the employer’s rights and remedies but also because in a later dispute the employer might be well served by showing it acted in good faith and with fair dealing by seeking and following a lawyer’s advice.

The deferred compensation arrangement is a contract. The employer needs to evaluate the prospect of breaching the contract terms. Your message touches on some of the considerations.

How about an EAP haiku? Eager And Pompous Exceedingly Angry Pimp Eats A Pineapple