A split dollar plan in combination with specially designed incentive plans can provide a highly competitive total rewards package.
The traditional programs offered are often ineffective at meeting the needs of participants and objectives of the organization.
Nonprofit organizations compete with for profit businesses to attract and retain talented executives and professionals.
However, they’re at a significant disadvantage.
- Nonprofits are unable to offer any form of equity compensation
- Tax restrictions limit plan designs and increase costs
We discuss the potential advantages of a split dollar plan for both participants and plan sponsors. As we note in the video above:
Advantages for Participants:
- Tax advantaged supplemental savings,
- Freedom from the risk of forfeiture requirements of 457(f) programs,
- Competitive investment options and,
- Financial security
For Plan Sponsor:
- The design flexibility to meet specific goals and objectives,
- Potentially significant cost reduction, including relief from the 21% excise tax and,
- Comparatively favorable Form 990 disclosure.
In addition to the video, we’ve put together a case study on the use of Split Dollar for a nonprofit entity – a group of Hospital Executives – that’s available for download. The case study provides a practical example comparing the use of 457(f) to a split dollar plan. The case study also lays out a number of key issues that should be considered when designing a supplemental retirement income plan for nonprofits.