Deferred compensation plans allow employers to provide benefits beyond those allowed through typical retirement plans. GuideStone offers three types of deferred compensation plans: 409A Non-qualified Deferred Compensation plans; 457(b) Deferred Compensation plans; and 457(f) Deferred Compensation plans.
409A Non-Qualified Deferred Compensation Plan
A 409A Non-Qualified Deferred Compensation Plan is designed as a church plan for employees of churches and Qualified Church Controlled Organizations (QCCO). Contributions remain assets of the employer until distributed to participants, and the plan uses a “rabbi trust” to hold the assets.
Who can participate?
If the employer is eligible to sponsor a church plan, the employer has maximum flexibility to determine who can participate.
Types of plan contributions
- Employer (non-elective) contributions.
- Salary deferral (elective) contributions.
Potential Tax advantages
- Generally, FICA taxation applies when contributions are made to the plan.
- Federal income tax applies when the benefits are paid or made available.
- Installment payments permit taxes to be spread over several years.
- No coordination of contribution limits with 403(b) or 401(k) plans.
457(b) Deferred Compensation Plan
A 457(b) Deferred Compensation Plan is designed as a church plan for employees of Non-Qualified Church Controlled Organizations (NQCCO). Contributions are held in a "rabbi trust" and remain assets of the employer until distributed to the participants.
Who can participate?
The employer has maximum flexibility to determine who can participate.
Types of plan contributions
- Employer (non-elective) contributions.
- Salary deferral (elective) contributions.
Eligibility
If the employer is eligible to sponsor a church plan, the employer has maximum flexibility to determine who is eligible.
Potential Tax advantages
- Generally, FICA taxation applies when contributions are made to the plan.
- Federal income tax applies when the benefits are paid or made available.
- Installment payments permit taxes to be spread over several years.
457(f) Deferred Compensation Plan
A 457(f) Deferred Compensation Plan is designed as a church plan for employees of Non-Qualified Church Controlled Organizations (NQCCO). Contributions are held in a "rabbi trust" and remain assets of the employer until distributed to the participants. Some 457(f) Deferred Compensation Plans may be subject to Code section 409A.
The 457(f) Deferred Compensation Plan allows unlimited deferrals to the plan as long as the deferrals and earnings are subject to a substantial risk of forfeiture and meet the reasonable compensation rule. Generally, a substantial risk of forfeiture requires the employee to perform substantial services to the organization for a minimum of two years.
Who can participate?
If the employer is eligible to sponsor a church plan, the employer has maximum flexibility to determine who can participate.
Types of plan contributions
- Employer (non-elective) contributions.
- Salary deferral (elective) contributions.
Potential Tax advantages
- FICA and Federal income tax withholding when the participant meets the substantial risk of forfeiture lapses.
- No contribution limits other than reasonable compensation rules.
To learn more about the retirement plans available to your specific organization,
email us or call us at
1-888-98-GUIDE (1-888-984-8433).