The retention plan only a nonprofit can offer.
For hospitals, health systems, universities, foundations and other tax exempt organizations. A plan that lets your executives and physicians accumulate far beyond 403(b) and 457(b) limits, and is designed so the organization recovers what it puts in.
Competing for talent with one hand tied.
Nonprofits compete with private equity groups and for profit systems for the same executives and physicians, but with far fewer tools.
Every dollar of leadership pay is published on Form 990, qualified plans stop at a fraction of what top earners need, and the rules on deferred pay are stricter than anywhere else. The result: the people who matter most are the easiest to recruit away.
No equity to offer
Nonprofits cannot grant stock or options, the main tool for profit employers use to keep leaders for the long term.
Low ceilings
403(b) and 457(b) plans cap contributions far below what an executive or physician earning seven figures needs to put away.
The 457(f) cliff
Traditional nonprofit deferred pay becomes taxable all at once when it vests, often forcing awkward exits and large tax bills.
The 21% excise tax
Section 4960 adds a 21% tax on pay above $1 million, and from 2026 it reaches a much broader group of employees.
Two policies. Each with one job.
Contributions are made as a split dollar loan rather than as pay. Most of each contribution funds a cash value life insurance policy the executive owns and controls. A smaller policy is assigned to the organization to secure its repayment.
Because the organization is tax exempt, the interest it earns on the loan is not taxed, which is what makes this structure work so well in the nonprofit world and so poorly anywhere else.
Better for the executive. Better for the balance sheet.
Beyond plan limits
Executives and physicians can put away far more than a 403(b) and 457(b) allow, alongside those plans rather than instead of them.
Recoverable
Organization contributions are designed to be repaid, so they can be carried as a long term receivable rather than an expense.
Flexible access
No age 59½ rule and no vesting cliff. When properly structured, the executive can access value through policy loans.
Selective
The organization chooses who is eligible, and can set vesting on its own contributions to reward long service.
Designed around your budget and your people.
Organization funded
The organization advances funds for the leaders it most wants to recruit or keep, often with a vesting schedule. Highest cost up front, and designed to be recovered.
Voluntary
Executives and physicians redirect part of their own pay into the plan. No matching or out of pocket cost for the organization.
Combined
The most common design: the organization funds its key leaders and opens voluntary participation to physicians and other high earners.
- Hospitals and health systems, including academic medical centers and post acute care.
- Universities and colleges, for presidents, deans, faculty leaders and coaches.
- Foundations and charities with highly compensated leadership teams.
- Faith based organizations, tribal organizations and credit unions.
- Executives, physicians and other leaders chosen by the organization.
- Typically people contributing $40,000 a year or more.
- Organizations of any size, from a single key physician to an entire medical staff.
Built with your board. Run by specialists.
Nonprofit boards rightly care about compliance before anything else. So every plan we bring is designed, documented and administered with a specialist administrator that works only with tax exempt organizations.
- Design and modeling for your CFO, HR leadership, counsel and compensation committee.
- Plan documents and enrollment, including education sessions for eligible leaders.
- Ongoing administration, so loan balances, policies and reporting stay in order year after year.
What every board should know first.
A plan like this is a long term commitment. Here is what we walk every board through before anything is signed.
- It needs proper structure. The tax and reporting results depend on correct plan documents and administration, reviewed by your counsel and auditors.
- Repayment is long term. The organization is repaid from its policy, which can be decades away.
- Insurance has costs. Policies carry charges and require underwriting, and values depend on policy performance.
- It is not a qualified plan. It sits alongside your 403(b) and 457(b), with different rules and protections.
Before you decide.
Why does this only work for nonprofits?
In a split dollar loan, the employer earns interest. A for profit company pays tax on that interest and usually wants a deduction, so the tax lands on someone. A tax exempt organization does not pay tax on the interest and does not need a deduction, which is what lets the structure work as intended.
How is this different from a 457(f) plan?
A 457(f) plan becomes taxable when it vests, often all at once. This plan is built on split dollar life insurance, so there is no vesting cliff, and the executive owns the policy that holds their value.
How does the organization get its money back?
Its contributions are repaid, with interest, from the policy assigned to it, typically at the executive's death. The repayment continues even if the executive has long since retired or left.
Can it help with Section 4960 and Schedule J?
Because contributions are structured as loans rather than current pay, the plan is designed to reduce compensation subject to the 21% excise tax and reported on Schedule J. Your counsel and auditors confirm the treatment for your organization.
Who decides who takes part?
The organization. Unlike a 403(b), this is not a qualified plan, so eligibility, contribution levels and any vesting can be set for each group or individual.