Guest post written by Tom Telford, Executive Vice President, Burns-Fazzi, Brock
A pending IRS rule has some credit unions worried about the fate of their deferred compensation plans.
For some eight years now, the IRS has been considering the tax status of nonqualified deferred compensation plans offered by federal credit unions (FCUs). At issue is whether FCUs are entities of the federal government. In its analysis, the IRS concluded that FCUs are not because they are not federal instrumentalities. The IRS also had the option of finding that FCUs are eligible to offer these compensation plans because they are tax exempt organizations.
These plans have historically been an additional option for retirement planning above and beyond traditional 401(k) plans.