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Is 457 plan the only non-qualified option available to tax-exempt comp


Guest Ralph

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I have two questions:

1)If a tax-exempt organization wishes to offer a non-qualified plan, is a 457 plan their only option?

2)Recently, I heard something about a private letter ruling that allowed a tax-exempt to maintain some type of non-qualified stock option plan. Is anyone familiar with this?

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There are a number of alternatives:

1. Tradtional NQDC that includes a substantial risk of forfeiture.

2. Life insurance, although I'm not certain to what extent split-dollar works these days. You should have no problem finding a life insurance salesman willing to make a sales pitch.

3. Discounted options. There are a number of different varieties of discounted options being hustled by Big 5 accounting firms. Some of the varities might work. The varities that are being hyped have problems that the salesman usually doesn't understand. See the discussion from June 2000 on "KeySOPs" on the NQDC message board. If you found a PLR that discusses discounted options, please post the cite.

NB: Tax exempt organizations often have opportunites to improve benefits for executives using 401(a) or 403(B) plans. I don't know what your objective is, but don't overlook the qualified plans beofre you jump into some sort of NQDC.

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