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ARTICLE · 18 JULY 2024

Code §457 Plans: Making The Best Choice For Your Nonprofit Organization

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If we've said it once, we've said it a hundred times (ok, maybe just that one time) – recruiting and retaining top talent can be a headache for nonprofit organizations forced to compete...

United StatesEmployment and HR
Belinda Morgan
Belinda Morgan
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If we've said it once, we've said it a hundred times (ok, maybe just that one time) – recruiting and retaining top talent can be a headache for nonprofit organizations forced to compete against for-profit organizations offering sought-after executives hefty base salaries and generous equity packages. For one thing, nonprofits must comply with IRS rules mandating compensation paid to their employees be both "reasonable" and not "excessive," and for another, nonprofits don't typically issue stock or other equity.

To tempt top talent to their teams, nonprofit organizations may elect to include nonqualified deferred compensation (NQDC) plan benefits in their executive compensation packages. Non-governmental nonprofit organizations1 can sponsor both "eligible" NQDC plans under Code §457(b) (457(b) plans) and "ineligible" NQDC plans under Code §457(f) (457(f) plans).

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