X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

ARLINGTON, Va. – NAFCU recently met with IRS officials to offer its take on clearer guidance of deferred compensation plans at federal credit unions. The Sept. 23 meeting comes nearly a month after CUNA and CUNA Mutual held a similar meeting with the IRS on the matter. Both meetings involve an April 9, 2004 IRS private letter ruling that said a FCU could not offer one of its executives a 457 deferred compensation plan. The IRS has recently added deferred compensation plans to its priority list and clearer guidance, most likely in the form of a revenue ruling, is expected by June or July 2005, said Gwen Baker, NAFCU director of regulatory affairs, who attended the meeting along with Carrie Hunt, NAFCU associate director of regulatory affairs. “We wanted to get an idea of what the IRS’s plans were going forward on guidance,” Baker said. She said the IRS is currently conducting research on 457 plans and has requested input from NAFCU and other interested parties on how they are treated. Eligible employers – including tax-exempt organizations as well as state and local governments – can offer highly compensated executives deferred compensation plans under Section 457 of the Internal Revenue Code, CUNA has said. Many federal credit unions use the plans to attract and retain talented executives and since the mid-1980s, FCUs have offered such plans but the tax code changed that required them to be in accordance with Section 457 of the IRC. The April private letter was silent about what rules would apply to the credit union’s deferred compensation plan. Plans at state-chartered credit unions are not being questioned, she emphasized. A 451 plan provides greater flexibility than a 457 plan in that there is no annual dollar contribution limit, and participants have more flexibility in taking distributions which affects when taxes must be paid. If FCUs are not subject to Section 457, this would mean that they would be able to offer discounted mutual fund options to their employees, according to CUNA. Baker said the IRS has indicated that a “reasonable period” for transition would be available to credit unions if it determines that section 457 doesn’t apply to FCUs’ plans. “The IRS said it is receptive to feedback from credit unions on what would be a reasonable period of transition,” Baker said. NAFCU is in the process of conducting its own research on the plans and is expected to submit a comment letter to the IRS in the next month or so, Baker said. “They’re looking for feedback relatively soon,” she said. Meanwhile, NAFCU has heard from some of its members on the matter and is reiterating to them that the IRS has said federal credit unions can continue to offer the plans. [email protected]

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.