Federal Credit Unions denied Deferred Comp plan under 457

[Guest Lawrence_Groves]

New PLR May 10 2004 request on behalf of Federal Credit Union references an April 9,2004 PLR made it clear that a federal credit union, as an instrumentality of the Federal Government , was not eligible to establish a nonqualified deferred compensation plan under Code 457, it was silent on what code section does apply for nonqualified plan of federal credit unions.

Any ideas on nonqualified deferred copensation plans for Federal Credit Unions?

[Guest Ken Bonus]

I assume that you mean that the credit union could not establish a broad-based deferred compensation plan under section 457(b). Credit unions are not governmental agencies but are typcially separately incorporated entities that are tax exempt under section 501©(6). As such, they cannot adopt a 457(b) plan but cant adopt a 457(f) plan for their top hat group, subject to the usual requirement for a substantial risk of forfeiture, etc.

[lbell]

This is a very interesting point can some one provide the PLR cite? I found the May 4th FOIA to Greg Jenner but I could not dig up the April PLR Thank you for your help

[davef]

A federal credit union is exempt under IRC 501©(1), due to the Federal Credit Union Act making it an instrumentality of the US. A state-chartered credit union is exempt from tax under IRC 501©(14).

The PLR generally stated that the federal credit union was not an eligible employer under 457. So it could not establish either a 457(b) or (f) plan.

The PLR has not been officially published. I can fax you a copy if you are interested.

It's my understanding that the original ruling requested the IRS to state what rules would apply if 457 didn't. However, that ruling request was withdrawn at the last minute. Presumably, IRC 451 would apply (similar to the rules that applied to tax-exempts prior to TRA-86), but we may need to wait for guidance from the IRS on that.

[lbell]

Dave F Please fax me the Plr 301 656 4128 Thank you larrybell