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

question 136

True/False

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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Definitions:

Futures Contract

An agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Underlying Asset

An asset (such as a stock, bond, commodity, or currency) upon which a derivative instrument, such as an option, is based.

Interest Rate Futures

Financial futures contracts that obligate the buyer to purchase an asset (like Treasury bills) with a fixed interest rate at a future date.

Federal Funds

Short-term funds transferred between financial institutions, typically overnight, at an interest rate set by the Federal Reserve in the United States.