Merging 2 457(b) top hat plans

I am looking for thoughts on merging 2 457(b) top hat plans when the plans have a different plan year end - for example one plan has a plan year end of 12/31 and the other plan has a plan year end of 9/30. In the qualified plan world, you cannot merge 2 plans if they have different plan years. I feel this is not really an issue in the non-qualified 457 plan context where there is no Form 5500 filing or testing requirements. Does anyone have any comments? Thank you!

If these are unfunded plans, the key issue is exactly which person is obligated to pay the deferred compensation.

If the two obligations (or sets of obligations) your client seeks to merge would change which person is the obligor, would any executive object?

When I represent an executive, we negotiate that no provision of the plan (really, a contract) can change without the executive’s affirmative written consent.

When the executive is asked, she looks at whether the proposed obligor’s financial strength and claims-paying ability are or would become stronger or weaker than those of the existing obligor.

Thanks for the response. One tax exempt will become the plan sponsor and the other a participating employer, so each will have obligations to fund based on their financial strength. I think from a plan document perspective, we are ok to merge since plan years do not have to match?

What measure of a deferred compensation obligation could be affected by a reference to a “plan year” or other accounting year?

What other purpose calls for an expression of a concept of a plan year?

If the answers to those questions are none, your rewrite of the document might get rid of any mention of a plan year.

Many tax-exempt organizations’ § 457(b) plans measure the obligation by reference to bookkeeping accounts that in turn refer to investments, whether participant-directed or not, the employer owns (whether directly, or as a grantor trust available to the employer’s creditors) as an unfunded way to meet the employer’s obligation. Those measure often have no reference to a plan year (and often none to any accounting year).

Section 457(b)(2)-(3)’s deferral limits refer to the participant’s tax year.

Some of § 457(d)’s conditions for a plan’s payout provisions refer to the calendar year.

Thank you!