New 457(f) Plan Contributions for Past Service

Fiscal year 6/30 organization wants to contribute funds in June, 2024 to a 457(f) plan being adopted on June 1, 2024.  I am told the employer has been "setting aside" funds to contribute on behalf of the executive for past services for the organization.

This sounds to me like a 409A, if not a 457(f) violation, as I don't believe contributions can be made for services performed before the executive has become a participant.  Nor do I believe it permissible to make the plan retroactive to a date before its adoption such that the executive could become a participant as of an earlier date, July 1, 2023, for example.

Am I right?  If so, can a contribution be characterized as something other than for past services to enable the contribution in the current fiscal year even though the plan didn't exist for the first 11 months of the fiscal year?

If it's a 457(f) plan, it's likely going to be a short-term deferral exempt from 409A.

Could the agreement be drafted such that the employer declares a discretionary contribution at the end of each fiscal year (at least for the first year ending 6/30/24)? I don't think you're necessarily constrained to defining the contribution in terms of "past" services. Under 457(f), it's likely going to be subject to the continued performance of future services to avoid forfeiture in any event. 

A 457(f) plan can be structured many ways, it could be in the form of DB SERP that takes into account average compensation and all years of employment, and may be offset by other employer-provided benefits. It could be an account balance plan where the employer books an annual contribution of whatever for the executive, there is no limit (other than overall reasonable comp & benefits for tax-exempts), so why would it matter what criteria the employer used to determine? 457(f) applies to any tax-exempt organization's NQ plan that provides benefits in excess of the eligible 457(b) limits. Whether exempt form 409A as a short-term deferral depends on the design.

As a NQP it is also unfunded by definition, so if/when/how the employer wants to set aside any assets to cover this benefit doesn't matter, except when the time comes to pay the obligation. This would be a book expense until such time.

If the employer was also wanting to allow the executive to elect to defer compensation into the arrangement then you have those timing issues, otherwise, no.

Given these plans are unfunded, "setting aside" funds just means the organization has some extra cash.  It's not directly to the 457(f) plan now or in the future.  Whatever contribution is to be made to the 457(f) plan can be completely discretionary.  As @EBECatty rightly points out, you need a substantial risk of forfeiture prospectively to delay taxation to a future date (presumably vesting in a lump sum to stay outside 409A).  

Plan Doc, because Section 415 does not apply, the unfunded benefit, at least for tax purposes (i.e., I am not addressing tax-exempt org reasonable compensation issues) the benefit can be whatever you want. Just must be unfunded and not vested.

Thanks, all.  I sense that making the nonelective contribution discretionary with the employer will work, rather than having the contribution based upon x% of compensation or some other formula that would appear to base the contribution on services performed before the participant entered the plan.

It would be perfectly fine (so long as there are no reasonable compensation issues) to have a fixed formula that takes into account past years of service, and/or to have contributions made to a rabbi trust to fund that benefit. The benefits do not have to be discretionary. The only things you cannot do for the period of deferral are a) to have the benefit become vested or b) to contribute to a trust or annuity that is not subject to the claims of the employer's creditors.