Taxation of rabbi trusts
: A rabbi trust
is an unfunded plan that provides some security for the employee because the employer does not have access to the trust assets.
And he has 200,612 more shares "held by the Rabbi Trust
, the receipt of which Mr.
The majority of nonqualified plan sponsors surveyed (62%) have set up a rabbi trust
for their plans.
Deferred money can be placed into a dedicated account like a sinking fund or a Rabbi Trust
, a kind of grantor trust that is actually a TOLI.
A secular trust is an irrevocable trust established to formally fund and secure nonqualified deferred compensation benefits, so called to distinguish it from a rabbi trust
. See Q 119.
Alternatives such as a Restrictive Bonus Plan, a Rabbi Trust
or a Secular Trust might also be considered (see pages 230, 510 and 537).
"A contract, however, that is owned by a grantor trust (such as a rabbi trust
), assets of which are treated as assets of a grantor that is engaged in a trade or business, is an employer-owned life insurance contract if the contract is otherwise described in Section 101(j)(3)," officials write.
One such vehicle that can hold deferred compensation assets is the "rabbi trust
Although the plan generally involves only the employer's unsecured promise to pay benefits, security to the executive can be provided through informal financing arrangements, such as corporate-owned life insurance (COLI) or a "rabbi trust
" (defined below).
In short, the rabbi trust
will protect employees against the employer's change of heart, and against change of management, but not against the employer's insolvency.
Therefore, deferred compensation is often placed into a "rabbi trust
" to prevent the employer from refusing to pay the funds in the future.
Under the defensive rabbi trust
plan, the group deposits the loan proceeds into a rabbi trust