COLI - am I missing something

[ERISAatty]

I don't usually work with Nonqualified deferred comp agreements funded by COLI, so am scrambling to get up to speed now that I have one in front of me.

I'm trying to determine what, if anything must be amended for 409A (with which I'm familiar), but I'm not finding a lot of guidance out there.

Since this is a nonelective plan that pays only on 409A-permitted specifed events, it seems we're OK as long as acceleration of payment is not permitted.

But I have a sneaky feeling that I'm missing something. Is the general view that 409A does NOT apply to COLI? I can't find much about it.

Any general insights welcome.

[Mark Whitelaw]

Yes. COLI is merely a source of employer monies to informally fund the obligations. While some plans may index 409A obligations to the COLI separate account share values to keep the obligations and assets close in value, they remain separate. The wall remains - one side is the 409A obligation, the other is how the company is going to may for it (pay as you go, COLI, Mutual Funds, etc.)

[Guest EXB 1]

Corret, it does not apply to the COLI financing. However, the DCP plan is subject to 409(A). Even if your distributions are compliant, you will want to make sure all plan document language complies such as the definition of disabililty, etc.