Avoiding Offset Under LTD Policy - Any Option Other Than 457(b)?

[Christine Roberts]

The LTD policy in question does not offset benefits from most employer sponsored qualified plans (described as 401(k), "thrift," 403(B), governmental plans, plans that the insured "pay for entirely themselves," and IRAs). This is a particular situation where the individual is going to work for a not for profit organization ("NFP org") and the only existing plan is a straight deferral 403(B) plan (no employer match).

The NFP org can only pay the individual a relatively small amount without incurring offsets from his disability benefit. In order to make up the difference between his artificially reduced salary, and what he would ordinarily earn, they would like to institute a private pension arrangement for him.

Problem is, the only way I know how to do this for a NFP org is through a 457(B) plan, and the LTD policy appears to offset, from the disability benefits, amounts that represent salary deferrals or waivers (other than 401(k)/403(B) contributions), even if the money going into the plan is styled as "employer contributions,"

Thus, I believe the question is, is there any way to institute a Section 457(B) plan for the individual, without a de facto waiver or deferral of compensation, and, if the answer is "no," are there any other options for a private pension arrangement in this setting?

[IRC401]

The answer to your question depends on facts not readily available to readers on the message board.

Before answering the question, I would want to read the LTD policy and have a complete understanding of the individual's current position and compensation package.

[Christine Roberts]

Thanks for replying. I posted the applicable terms of the policy on the Miscellaneous Benefits Board - go to this link:

http://benefitslink.com/boards/index.php?showtopic=14178