Mississippi-based executive Todd Mardis serves as the president of Capital Preservation Services, LLC. In this capacity, he oversees daily operations at the firm and works with clients to provide a range of tax planning services. Todd Mardis and his team also provide clients with services related to asset protection and estate planning, including nonqualified deferred compensation (NQDC) plans.
Deferred compensation plans are specific types of employee benefits plans offered by business owners to service employees. Through these types of plans, the employee grants their employer the ability to defer bonuses, wages, or other compensation that is earned during the year until a later year. At the same time, taxes on this compensation are also deferred until the employee actually receives the income in the future.
Deferred compensation plans can be either qualifying or non-qualifying. NQDC plans are predominantly offered to executive-level employees, since 401(k) plans and other qualifying plans are often not enough for high-earners. This is due to the contribution limits imposed on qualified deferred compensation plans. NQDC plans have no such limitations imposed on contributions, nor does the IRS require distributions from such plans.
However, while this freedom in regard to contributions is appealing to high earners, the money set aside in an NQDC plan is usually not protected against loss. Such plans are not covered by the Employee Retirement Income Security Act (ERISA), and the money within them are generally regarded as assets of the company. If the company goes bankrupt, money set into these funds may be used to pay off debts.
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