Deferred Compensation Plans

Your cooperative’s deferred compensation plan is a partnership between the plan administrator (the cooperative), the consultant (NRECA or a third-party selected by your cooperative) and the investment provider (Homestead Funds).

Our Role

With deferred compensation accounts established for a nonqualified plan, the cooperative is the account owner and plan administrator. This means the cooperative is responsible for plan management tasks such as:

  • Determining participant eligibility
  • Monitoring contribution limits
  • Initiating and monitoring account distributions

Homestead Funds is a separate entity from NRECA and supports the cooperative differently. NRECA’s Deferred Compensation Team is your first stop for plan questions and Homestead Funds can answer account questions.

Together, NRECA and Homestead Funds provide cooperatives with deferred compensation turnkey programs for both tax-exempt and taxable cooperatives.

Homestead Funds does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

Establishing Participant Accounts

After the co-op board has adopted the deferred compensation plan, the next step is to establish accounts under the cooperative’s name for the benefit of the underlying participant. Homestead Funds paperwork is separate from any plan-level paperwork provided to NRECA’s Deferred Compensation Team. If this is the first deferred compensation plan for the cooperative with Homestead Funds, we will need:

Homestead Funds maintains the names of the account signers on file, so if the account signers have not changed, each new participant account only requires the Deferred Compensation Participant Enrollment Form for that participant.

Pro tips for benefits administrators:

  • Know the plan type at initial plan setup and with each participant enrollment. This is important information to help with plan administration. If you are uncertain of your plan type, the NRECA Deferred Compensation Team can provide guidance.
  • If the plan document allows, you can choose for participants to have telephone exchange options on the application. This allows a participant to exchange or rebalance current money in the account by speaking with a Homestead Funds representative. If you don’t, any such requests must be submitted in writing and signed by an authorized signer for the cooperative as on file with Homestead Funds.
  • All mailings will be sent to the cooperative address. Make sure participants receive a duplicate copy of the quarterly statement and investment confirmation statements by filling out the “Additional Mail” section of the application.

Making Deposits

Deposits to deferred compensation accounts should come from a cooperative account, not from the participant. Money can be submitted by Direct Deposit ACH, FedWire or check. Instructions for each method are available on the Employer Instructions to Submit Funds. Homestead Funds can accept money as frequently as you prefer. In fact, many cooperatives submit money biweekly to match with their payroll cycle.

Account rebalances and fund exchanges 
These can be made by phone by either the authorized signer for the cooperative or the plan participant. Telephone exchanges can only be made if that was elected on the account application, although the service can be added to the account later at the direction of the cooperative. If telephone exchange is not an option on the account, the requests can always be submitted in writing, but the written request must be signed by a cooperative authorized signer as on file with Homestead Funds. Account rebalances and exchanges only apply to current-day assets.  

Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.

Future allocation changes 
If a participant wants to change the dollar amount or the fund that his or her contribution is being deposited to, this change should be made at the cooperative. Homestead Funds does not maintain future deposit instructions. Each time money is submitted by the cooperative for deferred compensation accounts, the cooperative must also provide a  Group Purchase Form for Contributions to Deferred Compensation Plan Accounts with allocation instructions unless the money is submitted by Direct Deposit ACH.   

Neither asset allocation nor diversification guarantees a profit or protects against a loss in a declining market. They are methods used to help manage investment risk.

Requesting an account distribution 
Account distributions should be requested on the  Deferred Compensation Plan Distribution Form. Please check the plan documents for distribution options. If you have questions regarding what a participant can do, contact the NRECA Deferred Compensation Team for guidance. Homestead Funds must receive the original form for processing. The distribution form must: 

  • Be signed by an authorized cooperative signer, as on file with Homestead Funds. The participant should not sign the form. If the participant is also an authorized signer on file with Homestead Funds, a different signer will need to sign the form. 
  • Be notarized.
  • Be received by mail. The mailing address is located at the top of page 1 of the form.

Receiving Distributions 

Distributions can be sent by check or ACH to the cooperative. To request distributions by ACH, you must have cooperative bank instructions on file. Bank instructions can be added on the  Deferred Compensation Account Maintenance Form.  Generally, you will receive a distribution from each fund in the account, so you may receive multiple checks or ACHs. 

Account Maintenance

Account Beneficiaries 

Account beneficiary designations are kept at the cooperative and should not be sent to Homestead Funds. Homestead Funds does not maintain beneficiary information for deferred compensation plan accounts.  

Verification of Assets 

It is common that cooperatives need a verification of assets letter to provide to their auditors at the end of their fiscal year. Cooperatives can request a letter by submitting a written request.  

Tax Status and Tax Forms 

Cooperative deferred compensation plan accounts are established as nontaxable with Homestead Funds. This means that we will not produce a 1099-Div or 1099-B for the cooperative for these accounts annually unless you inform us that you should receive the tax form. If your cooperative is a taxable entity and you need tax forms produced for the cooperative, you can update the tax status with Homestead Funds by completing the  Deferred Compensation Account Maintenance Form. 

Authorized Account Representatives 

To update signers, submit the  Deferred Compensation Plan Authorized Cooperative/Employer Representative Form when you establish the cooperative’s first deferred compensation account with Homestead Funds. The individuals named on the form will be maintained on file with Homestead Funds and do not need to be resubmitted with each application. 

Deferred Compensation Plan Basics