What are the benefits?
- Easy to administer
- Low plan administration costs
- Employer and executive may contribute to the plan
- Helps attract and retain valued executives
- Contributions are made with pre-tax dollars
- Earnings compound tax-deferred
- Earnings are paid when the executive is likely to be in a lower tax bracket
Factors to consider:
Who is eligible for the plan? (Note: Only highly compensated employees or a select group of management employees are eligible for 457(f) plans.
- Who will be eligible to be in the plan?
- What age will they be eligible for the payouts?
- Will IRC 4960 impact the expense?
- How do you determine contribution levels?
- Who will administer the plan? Often finding someone to administer a 457(f) plan can be difficult
- Will the payouts begin at the normal retirement age, a retirement age earlier than age 60, or will retirement be deferred with payments at a future date? (Remember, mandatory retirement may apply to certain “bona fide” executives. That group may or may not include executives eligible for these plans.)