The IRS eventually published a model rabbi trust
document in Rev.
One mechanism available to respond to these security concerns is the rabbi trust
With TOLI, the company funds the SERP liability by structuring a non-qualified irrevocable benefit trust, also referred to as a rabbi trust
So, unlike the rabbi trust
(see page 510), the secular trust can protect employees from both an employer's future unwillingness to pay promised benefits and an employer's future inability to pay promised benefits due to bankruptcy or other financial difficulties.
An estate and tax planning strategy may arise for employees that are rabbi trust
beneficiaries and do not require all of their deferred compensation and any accrued interest.
Less serious risks--for example, those imposed by a company's changing hands or its change of heart about offering such a benefit-can be reduced by choosing a rabbi trust
or one of several conventional options that meet the requirements of the IRS.
And while trusts can protect these funds in the event of a takeover, the currently popular rabbi trust
provides no security against loss if company bankruptcy or insolvency occurs.
The assets in the Rabbi trust
remain subject to the claims of creditors of the Company and are not the property of the participant.
92-65 provides general guidance for securing advance rulings for arrangements that employ the rabbi trust
Another way companies can ensure employees the money will be available is to set it aside in a trust designed specifically for that purpose, the most common of which is the rabbi trust
To allay their concerns, Minnich advises business owners to establish a Rabbi trust
to hold the retirement plan assets.
A Rabbi Trust
provides the employee with additional security that he or she will receive benefits in the event of a hostile change in management, without accelerating employee taxation.