457(f) Employee Contributions

A 457(f) plan was drafted for an executive of a 501(c)(3).  The employer is making non-elective contributions and the executive is able to make additional elective contributions.  The plan document is in an adoption agreement format and the contribution section shows:

Contributions to Defined Contribution Accounts are permitted (check all that apply):
a. [ X ] Participant Contributions.
b. [ ] Matching Contributions.
c. [ X ] Nonelective Contributions.
d. [ ] 401(k) Wrap Contributions.

The CPA for the 501(c)(3) has posed the following: "We’ve run into some issues regarding the 457(f) plan implementation with the various payroll providers that we have engaged with. They have been unable to implement a pre-tax Employee 457(f) code with no limit on contribution amount per the plan documents.  Is there an IRS publication that supports this provision?"

I have some, but not a lot, of experience with 457(f) plans and I've never had this questioned.  Has anyone out here with more 457(f) experience run into this, know of any specific publication, or have a suggestion about how to respond?

Catch22PGM, your post would indicate that the exec is supposed to put his own salary deferral under vesting and not get a match? That does not work. IRS will not accept that there is a risk of forfeiture.

There is a special forfeiture provision in this document that states "100% of the account is forfeitable upon termination before Normal Retirement Age. The intent of the plan is to be exempt from both Section 457(f) and Section 409A under the short-term deferral rule and the plan is to be interpreted and administered to accomplish this intent."

So the intent of the plan is for the employer to make non-elective contributions but also allow the executive to make an election to defer additional compensation knowing that there is a substantial risk of forfeiture should the executive leave before normal retirement age.  Upon attaining NRA the account loses the SRF and there will be tax consequences at that time.

Just FYI - I didn't write the document or adoption agreement but after reading through it I didn't think the elective deferral was a problem. But again, 457(f) is not something I deal with regularly so please let me know if I'm wrong.

Recognizing at least the point Luke Bailey describes (and recognizing a possibility of several others):

Consider that the charitable organization needs its lawyers’ advice, including an executive-compensation lawyer’s advice.

Consider that each executive needs her lawyers’ advice.

A payroll-services provider might have good legal-protection and business reasons for limiting its services.