Not-for-Profit organizations have the ability to create a supplemental retirement plan under IRC Section 457(b). The plan must be discriminatory in that its participants must be a “select” group of employees, typically restricted to key management. The plan allows for employees to defer a set amount each year for retirement, with the current limit at $18,000, in addition to what may be deferred through an existing qualified 401(k) or 403(b) plan. Monies deferred into a 457(b) plan remain an asset of the organization, subject to a “risk of forfeiture”. Contributions and interest (earnings) on the 457(b) account are tax-deferred until paid.
An IRC Section 457(f) plan can also be created to allow the organization to provide additional retirement contributions above the 457(b) and qualified plan limitations, with no limit on the amount of the contribution to the deferred account. Contributions and earnings are also tax-deferred until paid, and the deferred account remains an organizational asset, subject to both a “risk of forfeiture” by creditors and a “substantial risk of forfeiture”, if the employee terminates voluntarily.