Whenever you think you have heard it all...giving money BACK to the employer

[Belgarath]

Wow. So, non-profit 457 plan. A participant wants to donate a large sum of money from their 457 account back to the non-profit. Assuming the plan does not specifically provide for this (I haven't read the document, but I don't see how it could) it seems like a taxable distribution to the participant would have to be made, and then donated to the non-profit. I have no opinion on the possible charitable deduction side of things for doing so. Any thoughts on this one?

[Peter Gulia]

If what the executive seeks to do is to release the charitable organization from all or some of the organization’s obligation to pay her deferred compensation, the charity should get advice from its lawyers and accountants and the individual should get advice from her lawyer and her accountant. They might consider:

How to document the release?

What accounting notes to put in the charity’s financial statements?

How the release would affect the next IRS Form 990 information return?

What tax information reporting is required or permitted?

If tax reporting is by a service provider rather than by the employer directly, what notices and instructions must or should be given under the service agreement?

How to value the release?

(Consider whether the value of the release might be less than the amount of the obligation released because the value might be discounted by the probability that the organization would not pay the deferred compensation when and as due under the plan’s provisions.)

This is not advice to anyone.

[Belgarath]

Thanks Peter.

[Artie M]

I don't know of any authority where a participant can refuse to take a qualified plan benefit (but of course I do not know everything).  Another thing, sounds like they don't want to refuse the entire amount but just a portion of it, which seems even more difficult.  Maybe roll it into an IRA then at age 73 start doing qualified charitable donations of up to $100K annually (i think that is the right amount but confirm, plus may be subject to reduction).  Then at death name the charity as the beneficiary for the remaining amount that they want to donate back.  This is stretching it out but if the participant does as proposed your characterization seems appropriate.     

[Peter Gulia]

Belgarath’s query is about a nonqualified plan—an unfunded deferred compensation plan for select-group employees of a nongovernmental tax-exempt organization.

A nongovernmental tax-exempt organization’s § 457(b) plan is not a § 402(c) eligible retirement plan, and so can’t be the “from” source of a rollover.

For an unfunded deferred compensation plan, a participant has no more than a contract right to be paid the deferred wages when and as the plan specifies.

So, much might be accomplished by working with the law of contract rights, releases, amendments, and novations.

[Artie M]

I apologize I never saw an "(f)" anywhere and you are right about the tax-exempt "(b)" ... apologies.  If an "f" then I would agree that it is a mere contract and not sure why he would need to ask the question.

[Bill Presson]

Also wondering if they have heard about making donations to not for profits from IRAs to eliminate RMDs. I get questions every year about doing that from the retirement plan.

[Peter Gulia]

Bill Presson, are you imagining a participant might perceive an unfunded deferred compensation plan, whether § 457(f) or § 457(b), as if it were an eligible retirement plan?

Although a nongovernmental, and nonchurch, tax-exempt organization’s unfunded plan ought to be “for a select group of management or highly compensated employees”, I’ve heard about participants who perceive an unfunded plan as just one more funded retirement plan.

And I’ve heard about participants misperceiving that a qualified charitable distribution could be made not only from an IRA but also from an employment-based retirement plan, or even from a plan one misperceives as similar to an eligible retirement plan.

Belgarath, if the circumstances are those I imagined, one hopes the executive can release the charitable organization from its obligation before the to-be-released deferred compensation is due.

[Bill Presson]

27 minutes ago, Peter Gulia said:

Bill Presson, are you imagining a participant might perceive an unfunded deferred compensation plan, whether § 457(f) or § 457(b), as if it were an eligible retirement plan?

Although a nongovernmental, and nonchurch, tax-exempt organization’s unfunded plan ought to be “for a select group of management or highly compensated employees”, I’ve heard about participants who perceive an unfunded plan as just one more funded retirement plan.

And I’ve heard about participants misperceiving that a qualified charitable distribution could be made not only from an IRA but also from an employment-based retirement plan, or even from a plan one misperceives as similar to an eligible retirement plan.

Belgarath, if the circumstances are those I imagined, one hopes the executive can release the charitable organization from its obligation before the to-be-released deferred compensation is due.

Peter, there is no limit to what a participant may perceive. 

[RatherBeGolfing]

1 hour ago, Bill Presson said:

Peter, there is no limit to what a participant may perceive. 

Amen Brother Bill!