Page 258 - Washington Nonprofit Handbook 2018 Edition

• Unemployment, vacation, paid time off and holiday pay plans

• Severance pay plans

• Apprenticeship and training programs

• Scholarship funds

• Prepaid legal services

It also should be noted that some of such plans may be subject to laws in
addition to ERISA and the IRC. For example, health benefit plans are subject to the
Affordable Care Act if the employer has 50 or more full time employees, welfare
plans utilizing insurance policies are subject to state insurance laws, and state labor
laws apply to certain arrangements. Employers considering offering such benefits
should seek advice regarding regulatory requirements and carefully consider their
financial and administrative capacity to offer such benefits.

d. Executive Deferred Compensation

Attracting and retaining appropriate executive talent can be a particular
challenge for nonprofit entities. In addition to appropriate salary and participation
in the menu of employee benefits offered to employees generally, employers often
consider establishing a deferred compensation arrangement. Under such an
arrangement, the employer agrees to pay the executive money in the future in
return for current service. Subject to certain conditions, the deferred
compensation is not included in the executive’s income tax until a later date. As
with other aspects of employee benefit plans, the subject of deferred executive
compensation is complicated and employers are advised to seek the advice of
experts. However, the following information may assist an employer in evaluating
its alternatives.

• A nonprofit employer can establish a plan under section 457(b) of the
Code. Such plans are called 457(b) plans, and can be offered only to
highly compensated employees with significant executive duties. In
many respects these plans operate similarly to 401(k) plans and 403(b)
plans, but there are key differences including the fact that any assets
set aside for the payment of benefits remain the property of the
employer, subject to the claims of the employer’s general creditors,
until paid.

WASHINGTON NONPROFIT HANDBOOK -247- 2018