Instructions For Schedule J Form 990 (Page 5 of 6) in pdf

reasonable estimate if actual numbers

plan. Under the terms of the plan

upon there being a sufficient incentive

aren't readily available.

beginning January 1 of calendar year 1,

compensation pool from which to make

she earns for each year of service an

the payment, Organization C enters

For this purpose, deferred

amount equal to 2% (0.02) of her base

$1,200 of deferred compensation in

compensation is compensation that is

salary of $100,000 for that year. These

column (C) in years 3, 4, and 5. In year

earned or accrued in, or is attributable

additional amounts are deferred and

6, Organization C pays $3,600

to, 1 year and deferred for any reason to

aren't vested until the executive has

attributable to years 3, 4, and 5, and

a future year, whether or not funded,

completed 3 years of service with

enters $3,600 in column (B)(ii) and

vested, or subject to a substantial risk of

Organization A. In year 4, the deferred

$3,600 in column (F).

forfeiture. This includes earned but

amounts for years 1 through 3 are paid

unpaid incentive compensation deferred

Example 4. A new executive

to the executive. For each of the years 1

under a deferred compensation plan.

participates in Organization D's

through 3, Organization A enters $2,000

But don't report in column (C) a deferral

nonqualified defined benefit plan, under

of deferred compensation for the

of compensation that causes an amount

which she will receive a fixed dollar

executive in column (C). For year 4,

to be deferred from the calendar year

amount per year for a fixed number of

Organization A enters $6,000 in column

ending with or within the tax year to a

years beginning with the first

(B)(iii) and $6,000 in column (F).

date that isn't more than 2

months

anniversary of her retirement. The

after the end of the calendar year

Example 2. Under the terms of his

benefits don't vest until she serves for

ending with or within the tax year. Note

employment contract with Organization

15 years with Organization B. Because

that different rules can apply for

B beginning July 1 of calendar year 1,

the benefits should be treated as

determining whether an arrangement

an executive is entitled to receive

accruing ratably over the 15 years, for

provides for deferred compensation for

$50,000 of additional compensation

year 1 the actuarial value of 1/15th of

purposes of Internal Revenue Code

after he has completed 5 years of

the benefits is reported as deferred

provisions such as sections 83, 409A,

service with the organization. The

compensation in column (C). For year 2,

457(f), or 3121(v).

compensation is contingent only on the

the actuarial value of 2/15ths of the

longevity of service. The $50,000 is

benefits minus last year's value of

Do not report deferred compensation

treated as accrued or earned ratably

1/15th is reported as deferred

in column (C) before it is earned or

over the course of the 5 years of

compensation in column (C). For year 3,

accrued under the principles described.

service, even though it isn't funded or

the actuarial value of 3/15ths of the

For this purpose, deferred

vested until the executive has

benefits minus last year's value of

compensation is generally treated as

completed the 5 years. Organization B

2/15ths is reported, and so on.

earned or accrued in the year that

makes payment of $50,000 to the

services are rendered, except when

Column (D). Nontaxable benefits are

executive in calendar year 6.

entitlement to payment is contingent on

benefits specifically excluded from

Organization B enters $5,000 of

satisfaction of specified organizational

taxation under the Internal Revenue

deferred compensation in column (C)

goals or performance criteria (other than

Code. Report the value of all nontaxable

for calendar year 1 and $10,000 for

mere longevity of service) under the

benefits provided to or for the benefit of

each of calendar years 2 through 5. For

deferred compensation plan. If the

the listed person, other than benefits

calendar year 6, Organization B enters

payment of an amount of deferred

disregarded for purposes of section

$50,000 in column (B)(iii) and $45,000

compensation requires the employee to

4958 under Regulations section

in column (F).

perform services for a period of time,

53.4958-4(a)(4). Common nontaxable

the amount is treated as accrued or

Example 3. An executive

and section 4958 disregarded benefits,

earned ratably over the course of the

participates in Organization C's

referred to as fringe benefits below, are

service period, even though the amount

incentive compensation plan. The plan

discussed in detail beginning on this

isn't funded and may be subject to a

covers calendar years 1 through 5.

page.

substantial risk of forfeiture until the

Under the terms of the plan, the

Depending on the type of benefit,

service period is completed.

executive is entitled to earn 1% (0.01) of

fringe benefits can be provided only to

Organization C's total productivity

Report deferred compensation for

employees or also to persons other than

savings for each year during which

each listed person regardless of

employees, such as directors,

Organization C's total productivity

whether such compensation is deferred

trustees, and independent

savings exceed $100,000. Earnings

as part of a deferred compensation plan

contractors. Fringe benefits can be

under the incentive compensation plan

that is administered by a separate trust,

entirely personal in nature or can

will be payable in year 6, to the extent

as long as the plan is established,

combine personal and business

funds are available in a certain

Instructions For Schedule J Form 990 Page 5

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