The Questions Everyone Asks, Answered Upfront.

A 457(b) plan is a tax-deferred supplemental retirement savings plan available to employees of tax-exempt organizations and state/local governments. Unlike a 403(b), contributions to a 457(b) are not subject to a 10% early withdrawal penalty before age 59½. Nonprofit executives can contribute to both a 403(b) and a 457(b) simultaneously, effectively doubling their tax-deferred savings. The annual contribution limit is $23,500 in 2025, with additional catch-up provisions for employees within three years of normal retirement age.

A 457(f) plan (an ineligible deferred compensation plan) allows tax-exempt organizations to promise future compensation to executives with no contribution limits. Unlike a 457(b) with annual caps, a 457(f) can defer any amount the board approves. The key requirement is a “substantial risk of forfeiture” — the executive must remain employed for a specified period or hit performance conditions to receive the benefit. 457(f) plans are commonly used as golden handcuffs to retain top nonprofit talent.

Both are tax-deferred retirement vehicles, but the key differences matter. A 403(b) carries a 10% early withdrawal penalty before age 59½; a 457(b) does not. A 403(b) is subject to employer matching and nondiscrimination rules; a 457(b) is not. Most importantly, the contribution limits are independent — a nonprofit executive can contribute the maximum to both plans in the same year, effectively doubling their tax-deferred savings. This is one of the most underutilized strategies in nonprofit executive compensation.

In a split-dollar arrangement, the nonprofit organization and the executive share the costs and benefits of a life insurance policy. The organization owns the policy and pays premiums. The executive’s family receives a portion of the death benefit. The organization recovers its premium costs from the remaining benefit. The economic benefit to the executive is reported as imputed income. It’s a powerful retention tool that can cost the nonprofit very little long-term, while the executive’s family receives a valuable benefit at minimal personal cost.

The simplest executive benefit structure. The nonprofit pays the premium on a life insurance policy that the executive owns outright. The premium is a tax-deductible bonus to the organization under IRC Section 162 and taxable income to the executive. The executive controls the policy, the beneficiary designation, and all cash value. It’s the most portable benefit because the policy travels with the executive if they leave the organization.

A SERP is a nonqualified deferred compensation arrangement under IRC §409A that promises an executive a supplemental retirement benefit beyond what their 403(b) or 457(b) provides. When funded through an IUL policy owned by the organization, the cash value grows tax-deferred and can be accessed via tax-free policy loans to fund the executive’s supplemental income at retirement. The death benefit provides cost recovery and key-person protection for the organization.

The CRT-IUL strategy combines a Charitable Remainder Trust with an Indexed Universal Life policy to create four simultaneous benefits: the donor sells appreciated assets and eliminates capital gains tax, receives lifetime income from the CRT, gets an immediate charitable income tax deduction, and uses the tax savings to fund an IUL policy in an ILIT that replaces the donated asset for heirs — tax-free. The charity receives the full remainder. The donor, charity, and heirs all win.

A QCD allows individuals age 70½ or older to transfer up to $105,000 per year directly from their IRA to a qualified charity. The distribution satisfies the Required Minimum Distribution, is excluded from taxable income, and the charity receives the full amount with no tax withheld. QCDs are especially valuable for donors who don’t itemize deductions, since the tax benefit comes from income exclusion rather than a charitable deduction.

A charitable gift annuity is a contract where the donor makes an irrevocable gift and receives guaranteed fixed payments for life in return. The donor gets an immediate income tax deduction, a portion of each payment is tax-free (return of basis), and the charity retains the remaining assets at the donor’s death. CGAs are commonly used by donors age 65+ who want guaranteed income combined with charitable impact.

Yes. NPPSS partners with fundraising professionals and development directors to build or strengthen planned giving programs. This includes designing bequest language, developing gift acceptance policies, creating donor cultivation tools, structuring insurance-based giving strategies, and training staff on planned giving conversations. We serve as the insurance architecture partner that turns donor intent into funded gifts.

An ILIT is a trust that owns a life insurance policy on the grantor’s life, removing the death benefit from the taxable estate. Because the grantor has no incidents of ownership, the proceeds pass to beneficiaries free of both income tax and estate tax. ILITs are used for estate tax liquidity, wealth replacement (replacing assets donated to charity), and estate equalization. The grantor funds the trust through annual gifts, and Crummey withdrawal powers qualify those gifts for the annual gift tax exclusion.

IUL inside an ILIT creates a four-layer tax shield no other instrument can match: tax-deferred growth (IRC §7702), tax-free access via policy loans (§7702(f)(7)), income-tax-free death benefit (§101(a)), and estate-tax-free transfer (§2042). The IUL adds cash-value accumulation with downside protection, flexible premiums, and the ability for the trustee to access funds during the grantor’s lifetime.

The federal estate tax exemption is $13.99 million per individual in 2025 ($27.98 million for married couples). This was doubled by the Tax Cuts and Jobs Act of 2017 and is scheduled to sunset at the end of 2025, potentially reverting to approximately $7 million per individual (adjusted for inflation). The estate tax rate on amounts above the exemption is 40%. This makes 2025 a critical planning window for establishing ILITs and implementing life insurance strategies.

Estate equalization uses life insurance to ensure each heir receives a fair share when family assets are illiquid or indivisible. If one child inherits the business and another inherits real estate, the third can receive a life insurance death benefit of comparable value. When the policy is owned by an ILIT, the benefit passes income-tax-free and estate-tax-free — avoiding forced sales and family conflict.