IRS Guidance On CU CompensationPlans
PARADISE ISLAND, Bahamas - (06/23/04) -- The IRS is expected to issue newguidance in the next six months about what credit unions can andcan't offer in the way of deferred compensation plans. Joe Tripalinof CUNA Mutual Group's Executive Benefits division told attendeesof CUES Annual Convention about a recent Private Letter Ruling fromthe IRS to a FCU that indicated the 457 tax laws do not apply toFCUs-but the agency refused to say which section does apply. Thiscould conceivably mean that section 451 applies instead, whichwould put FCUs on an even footing with for-profit financialinstitutions in terms of tax-differed compensation for the firsttime. The catch: the PLR technically only applies to the FCU thatrequested it. Still, other FCUs could opt to request PLRs of theirown, but Tripalin suggested "staying the course" and waiting forthe IRS to issue additional guidance. After that happens, thequestion will be whether or not state CUs will also be givensimilar status. There is a risk, Tripalin noted, that the IRS willeffectively create two different classes of credit unions thatcould put state charters at a disadvantage.