Deferred Comp vs 457(f)

[austin3515]

Why would a non-profit have a 457(f) instead of just a regular old deferred comp plan? Because the (f) requires a substantial risk of forfeiture to avoid taxation, whereas the regular non-quals do not (at least not with respect to fed taxes--it would of course be subject to PR taxes), it seems to me that one should never use a 457f.

So then, I gather a non-profit is required to use a 457(f)? Is it because anything sponsored by a tax exempt entity that is not a 457(b) is by default a 457(f)? i.e., the plan sponsor has no say in the matter?

[jpod]

"Is it because anything sponsored by a tax exempt entity that is not a 457(b) is by default a 457(f)? i.e., the plan sponsor has no say in the matter?"

Yes.

[austin3515]

Thanks!

[Peter Gulia]

Some executives or other select-group employees desire a 457(f) plan because one desires even more deferral after exhausting the limits of a 403(b) or 401(k) plan and a 457(b) plan.

Some employers like a 457(f) plan because it requires an employment-related condition that is a substantial risk of forfeiture. An employer might see this as improving its ability to keep a desired executive.

Both employers and employees use both kinds of deferred compensation as a way not to increase the salary reported on Form 990, hoping that some readers won't put together the pieces to estimate what the real total compensation is.