change in control non-profit

[Scuba 401]

I am trying to explain to a client how the change in control provision works in a 457(f) plan. can someone please explain how you apply the definition in the regs to corporations without owners or shareholders?

[jpod]

What definition in which regs and how is a CIC relevant under the 457(f) arrangement? With answers to those questions perhaps we can help.

[Scuba 401]

409A regs have a definition I believe. it is going to be a trigger for distribution under the plan.

[jpod]

If it's going to be a trigger for simultaneous vesting and distribution, you don't need a 409A-compliant definition.

[Scuba 401]

the plan (relius nonqualified) used the definition for change of control from the reg. I was wondering whether you could just apply the provision by analogy. for example, in a change of control for a non profit the board of directors will change. that seems to meet the effective control prong of the definition.

[jpod]

If it says that "any" 409A CIC is a trigger, I believe that a certain level of change in board composition would be a trigger, but you'd have to look that up. Other than that I would say analogizing doesn't work. Why doesn't the employer just recognize that this was less than good drafting and amend the plan to have it say what the employer would like it to say?

[Carol V. Calhoun]

There is nothing comparable to 409A's change in control provision under 457(f), because the two statutes are structured quite differently.

457(f): Benefit is taxable in all events upon lapse of a substantial risk of forfeiture.

409A: Benefit is taxable upon lapse of a substantial risk of forfeiture only if the requirements of 409A are not met.

Among the requirements of 409A is that the benefit be payable on one of several events, one of which is a change in control.

So while the definition of substantial risk of forfeiture is similar (though not identical) in 409A and 457(f), the change in control rules in 409A (which have nothing to do with substantial risk of forfeiture) have no application to 457(f).